UOBKayhian on 28 Apr 2015
FY15F PE (x): 12.3
FY16F PE (x): 12.9
Sharply lower ship repair revenue. Sembcorp Marine (SMM) posted a net profit of
S$106m (-14% yoy) for 1Q15. Results were below our expectations due to: a) a sharp
37% yoy fall in ship repair revenue from S$158m to S$100m, and b) a higher effective
tax rate of 19.4% in 1Q15 vs 17.1% in 1Q14. Management attributed the lower ship
repair revenue to a poor shipping market environment and the absence of large repair
jobs (eg gas carrier repairs) due to a timing difference. 1Q15’s operating margin was
weak at 10.6% (4Q14: 16.1%, 3Q14: 10.0%, 2Q14: 11.5%, 1Q14: 11.1%). Excluding a
forex translation loss of S$10.9m, operating margin would have been higher at 11.4%.
At U$70/bbl for Brent oil price, we estimate a 1-year forward P/B is 2.1x for large-cap
shipyards. We peg SMM at a 15% discount, translating into 2016F P/B of 1.8x. While we
have cut our earnings forecasts for 2015-17 by 4-5%, our target price for SMM remains
unchanged at S$2.92 as we have lowered our projected DPS. Entry price: S$2.50.
Tuesday, 28 April 2015
Raffles Medical Group
UOBKayhian on 28 Apr 2015
FY15F PE (x): 13.1
FY16F PE (x): 15.4
Muted 1Q15. Raffles Medical’s (RMG) 1Q15 net profit of S$15m (+3% yoy) came in 2% Major Shareholders below our expectation. While 1Q15 net profit accounted for only 20% of our full-year estimate, we expect a seasonally stronger 2H to lift earnings closer to our estimates. The muted earnings growth was due to a 1.1ppt decline in operating margin to 18.6% as the growth in staff costs (+15% yoy) outpaced revenue growth of 9% due to new hirings (121 new staff, of which 33 are doctors) ahead of its expansion plans (new medical centres at Shaw Centre and Raffles Holland V), and additional bonus to nurses in 1Q15 (to match the bonus for public-sector nurses). Our preferred healthcare pick in Singapore. Maintain HOLD and DCF-based target price of S$4.30. At our target price, the implied 2016F PE is 27.9x. This is close to +1SD to mean PE of 29.0x but we think this is deserved owing to its strong cash flow generation and a resilient business model. Also, 2015-17F ROE of 13.2-15.0% are also higher than its long-term average ROE of 11.6% (1997-2014). Entry price is S$3.80.
FY15F PE (x): 13.1
FY16F PE (x): 15.4
Muted 1Q15. Raffles Medical’s (RMG) 1Q15 net profit of S$15m (+3% yoy) came in 2% Major Shareholders below our expectation. While 1Q15 net profit accounted for only 20% of our full-year estimate, we expect a seasonally stronger 2H to lift earnings closer to our estimates. The muted earnings growth was due to a 1.1ppt decline in operating margin to 18.6% as the growth in staff costs (+15% yoy) outpaced revenue growth of 9% due to new hirings (121 new staff, of which 33 are doctors) ahead of its expansion plans (new medical centres at Shaw Centre and Raffles Holland V), and additional bonus to nurses in 1Q15 (to match the bonus for public-sector nurses). Our preferred healthcare pick in Singapore. Maintain HOLD and DCF-based target price of S$4.30. At our target price, the implied 2016F PE is 27.9x. This is close to +1SD to mean PE of 29.0x but we think this is deserved owing to its strong cash flow generation and a resilient business model. Also, 2015-17F ROE of 13.2-15.0% are also higher than its long-term average ROE of 11.6% (1997-2014). Entry price is S$3.80.
DBS Group Holdings
UOBKayhian on 28 Apr 2015
FY15F PE (x): 10.8
FY16F PE (x): 9.9
DBS reported net profit of S$1,269m for 1Q15, above our forecast of S$1,004m and consensus estimate of S$1,020m. Toned down expectations on loan growth. DBS expects trade loans to moderate in 2Q15. Management has lowered the guidance for loan growth in constant currency terms for 2015 from 8% to 5-6%. Maintain BUY. Our target price of S$25.08 is based on P/B ratio of 1.56x, which is derived from the Gordon Growth Model (ROE: 11.3%, required return: 7.8% and constant growth: 1.5%).
FY15F PE (x): 10.8
FY16F PE (x): 9.9
DBS reported net profit of S$1,269m for 1Q15, above our forecast of S$1,004m and consensus estimate of S$1,020m. Toned down expectations on loan growth. DBS expects trade loans to moderate in 2Q15. Management has lowered the guidance for loan growth in constant currency terms for 2015 from 8% to 5-6%. Maintain BUY. Our target price of S$25.08 is based on P/B ratio of 1.56x, which is derived from the Gordon Growth Model (ROE: 11.3%, required return: 7.8% and constant growth: 1.5%).
Midas Holdings
OCBC on 27 Apr 2015
Over the past two weeks, shares of Midas’ key customers and peers in China re-rated and we think it is due to market expectations of strong domestic railway spending by the Chinese government over the next five years, growth potential outside of China driven by the Silk Road Plan, and increased competitiveness of CRRC to win more overseas projects. We believe the longer-term outlook China’s rail businesses are certainly positive. However, we prefer to remain cautious on Midas in the near-term on persistent start-up costs, uncertainty over its new business segment as well as whether competitiveness between suppliers of CSR and CNR will increase post-merger. As Midas has exposure to China’s potential growth in rail industry through CNR, we raise our valuation from 0.6x to 0.65x FY15F P/B (-0.75SD to 5-year historical mean), but still discounted for near-term weakness and uncertainty. Consequently, our FV increases from S$0.330 to S$0.375. Maintain HOLD.
Re-rating of customers and peers in China
Over the past two weeks, shares of Midas’ key customers in China re-rated as CSR Corp (CSR) and China CNR Corp (CNR) share prices spiked more than 50% while its peer, China Zhongwang Holdings Ltd saw a 31% increase in share price over the same period. We believe these increases came after: 1) the release of the details of China’s Silk Road Plan in end Mar-15 and, 2) regulatory approval in early Apr-15 of the merger between CSR and CNR to form CRRC. We believe the re-rating is due to market expectations of strong domestic railway spending by the Chinese government over the next five years, growth potential outside of China driven by the Silk Road Plan, and increased competitiveness of CRRC to win more overseas projects. Also, we think railway spending planned for the 13th five-year-plan (FYP) (2016-2020) will not differ much from the 12th FYP (2011-2015), which is in the region of RMB3.0t. On these reasons, we believe the longer-term outlook China’s rail businesses are certainly positive.
Uncertainty and near-term weakness for Midas
While the growth potential in China’s rail industry is huge over the longer-term, we prefer to remain cautious on Midas in the near-term: 1) start-up costs from its two new plants are likely to continue to erode earnings; Luoyang plant (existing business segment) is targeted to generate revenue from 2Q15 while the Liaoyuan plant (new business segment) is only expected to generate revenue from 2Q16 onwards, 2) uncertainty over whether its new business segment of producing basic materials is able to gain traction quickly, since competition is likely to be high, 3) post-merger, the door opens up for suppliers of CSR and CNR to compete and try to gain share of orders from each other but at this stage, it remains uncertain over how this situation will play out.
Maintain HOLD on higher FV
As Midas has exposure to China’s potential growth in rail industry through CNR, we raise our valuation from 0.6x to 0.65x FY15F P/B (-0.75SD to 5-year historical mean), but still discounted for near-term weakness and uncertainty. Consequently, our FV increases from S$0.330 to S$0.375. Maintain HOLD.
Over the past two weeks, shares of Midas’ key customers in China re-rated as CSR Corp (CSR) and China CNR Corp (CNR) share prices spiked more than 50% while its peer, China Zhongwang Holdings Ltd saw a 31% increase in share price over the same period. We believe these increases came after: 1) the release of the details of China’s Silk Road Plan in end Mar-15 and, 2) regulatory approval in early Apr-15 of the merger between CSR and CNR to form CRRC. We believe the re-rating is due to market expectations of strong domestic railway spending by the Chinese government over the next five years, growth potential outside of China driven by the Silk Road Plan, and increased competitiveness of CRRC to win more overseas projects. Also, we think railway spending planned for the 13th five-year-plan (FYP) (2016-2020) will not differ much from the 12th FYP (2011-2015), which is in the region of RMB3.0t. On these reasons, we believe the longer-term outlook China’s rail businesses are certainly positive.
Uncertainty and near-term weakness for Midas
While the growth potential in China’s rail industry is huge over the longer-term, we prefer to remain cautious on Midas in the near-term: 1) start-up costs from its two new plants are likely to continue to erode earnings; Luoyang plant (existing business segment) is targeted to generate revenue from 2Q15 while the Liaoyuan plant (new business segment) is only expected to generate revenue from 2Q16 onwards, 2) uncertainty over whether its new business segment of producing basic materials is able to gain traction quickly, since competition is likely to be high, 3) post-merger, the door opens up for suppliers of CSR and CNR to compete and try to gain share of orders from each other but at this stage, it remains uncertain over how this situation will play out.
Maintain HOLD on higher FV
As Midas has exposure to China’s potential growth in rail industry through CNR, we raise our valuation from 0.6x to 0.65x FY15F P/B (-0.75SD to 5-year historical mean), but still discounted for near-term weakness and uncertainty. Consequently, our FV increases from S$0.330 to S$0.375. Maintain HOLD.
Mapletree Greater China Commercial Trust
OCBC on 27 Apr 2015
Mapletree Greater China Commercial Trust (MGCCT) reported a robust set of 4QFY15 results which exceeded our expectations, due largely to better-than-expected rental reversions achieved. Management delivered positive rental uplifts of 22% and 30% at Festival Walk’s retail and Gateway Plaza’s office segments, respectively, as at 31 Mar 2015. Other operational trends also remain healthy. We raise our FY16 and FY17 DPU projections by 7.8% and 7.6%, respectively, after factoring in higher rental rate and stronger HKD and CNY assumptions in our model. Rolling forward our valuations, our fair value estimate for MGCCT is increased from S$1.01 to S$1.07. However, we are maintaining our HOLD rating, as we believe its positives have already been priced in by the market.
4QFY15 results beat our expectations
Mapletree Greater China Commercial Trust (MGCCT) reported a robust set of 4QFY15 results which exceeded our expectations, due largely to better-than-expected rental reversions achieved. Gross revenue grew 17.4% YoY to S$76.2m, while DPU rose 9.8% to 1.742 S cents. This was underpinned by solid rental uplifts and continued high occupancy rates at both Festival Walk (FW) and Gateway Plaza (GP). For FY15, MGCCT’s revenue of S$281.1m (+11.3%) and DPU of 6.543 S cents (+10.4%) came in 2.3% and 3.4% ahead of our projections, respectively.
Operational trends illustrate resilience
Management delivered positive rental reversions of 22% and 30% at FW’s retail and GP’s office segments, respectively, as at 31 Mar 2015. The passing rent for FW (retail) stands at ~HK$127 psf per month (psf pm), while prime retail malls in Hong Kong are still fetching rents ranging from HK$150-180 psf pm. For GP (office), its passing rent of ~CNY318 psm pm also falls below current market spot rents of CNY320-350 psm pm. MGCCT’s gearing ratio stood at 36.2%, as at 31 Mar 2015, while 87% of its interest cost has been hedged for FY16. Management has also hedged ~60% of its forecasted FY16 distributable income. Operationally, MGCCT’s overall portfolio occupancy remained healthy at 98.8%, and footfall and tenant sales at FW registered growth of 1.9% and 5.8% to 41.8m and HK$5.62b, respectively, for FY15.
Raise forecasts and fair value, but maintain HOLD
Looking ahead, MGCCT highlighted that despite China’s restriction on visits of Shenzhen residents to Hong Kong to once a week, this is not expected to have a significant impact on FW’s performance. This is because FW still relies predominantly on the local catchment area for growth. We expect FW to remain resilient, and raise our FY16 and FY17 DPU projections by 7.8% and 7.6%, respectively, after factoring in higher rental rate and stronger HKD and CNY assumptions in our model. Rolling forward our valuations, our fair value estimate for MGCCT is increased from S$1.01 to S$1.07. However, we are maintaining our HOLD rating, as we believe its positives have already been priced in by the market.
Mapletree Greater China Commercial Trust (MGCCT) reported a robust set of 4QFY15 results which exceeded our expectations, due largely to better-than-expected rental reversions achieved. Gross revenue grew 17.4% YoY to S$76.2m, while DPU rose 9.8% to 1.742 S cents. This was underpinned by solid rental uplifts and continued high occupancy rates at both Festival Walk (FW) and Gateway Plaza (GP). For FY15, MGCCT’s revenue of S$281.1m (+11.3%) and DPU of 6.543 S cents (+10.4%) came in 2.3% and 3.4% ahead of our projections, respectively.
Operational trends illustrate resilience
Management delivered positive rental reversions of 22% and 30% at FW’s retail and GP’s office segments, respectively, as at 31 Mar 2015. The passing rent for FW (retail) stands at ~HK$127 psf per month (psf pm), while prime retail malls in Hong Kong are still fetching rents ranging from HK$150-180 psf pm. For GP (office), its passing rent of ~CNY318 psm pm also falls below current market spot rents of CNY320-350 psm pm. MGCCT’s gearing ratio stood at 36.2%, as at 31 Mar 2015, while 87% of its interest cost has been hedged for FY16. Management has also hedged ~60% of its forecasted FY16 distributable income. Operationally, MGCCT’s overall portfolio occupancy remained healthy at 98.8%, and footfall and tenant sales at FW registered growth of 1.9% and 5.8% to 41.8m and HK$5.62b, respectively, for FY15.
Raise forecasts and fair value, but maintain HOLD
Looking ahead, MGCCT highlighted that despite China’s restriction on visits of Shenzhen residents to Hong Kong to once a week, this is not expected to have a significant impact on FW’s performance. This is because FW still relies predominantly on the local catchment area for growth. We expect FW to remain resilient, and raise our FY16 and FY17 DPU projections by 7.8% and 7.6%, respectively, after factoring in higher rental rate and stronger HKD and CNY assumptions in our model. Rolling forward our valuations, our fair value estimate for MGCCT is increased from S$1.01 to S$1.07. However, we are maintaining our HOLD rating, as we believe its positives have already been priced in by the market.
CapitaRetail China Trust
OCBC on 27 Apr 2015
CapitaRetail China Trust (CRCT) reported 1Q15 results which came in within our expectations. Gross revenue jumped 13.3% YoY to S$54.5m due to rental growth from its multi-tenanted malls and a stronger CNY vis-à-vis the SGD. DPU grew 10.0% to 2.64 S cents. CRCT’s malls registered robust tenants’ sales growth of 14.3% YoY, while shopper traffic inched up 1.6%. Although management secured positive rental reversions of 12.8% in 1Q15, we note that this was softer than the 20.6%-24.9% rental uplifts recorded from 1Q14 to 4Q14. As at 31 Mar 2015, CRCT had a healthy gearing ratio of 28.6%, with an average cost of debt of 2.99%. 76.7% of its total borrowings are fixed (89.0% if we exclude onshore RMB loans). We retain our forecasts, HOLD rating and S$1.64 fair value estimate on CRCT given this in-line set of results. The stock is currently trading at FY15F distribution yield of 6.1% and P/B ratio of 1.08x.
1Q15 results within our expectations
CapitaRetail China Trust (CRCT) reported 1Q15 results which came in within our expectations. Gross revenue jumped 8.1% YoY in CNY terms to CNY250.4m, driven by rental growth from its multi-tenanted malls. Due to a stronger CNY vis-à-vis the SGD, CRCT’s gross revenue jumped 13.3% YoY to S$54.5m and this formed 25.4% of our FY15 forecast. Similarly, CRCT’s NPI increased 1.9% YoY in CNY terms to CNY158.6m, but growth was stronger at 6.8% in SGD terms to S$34.5m. DPU for 1Q15 came in at 2.64 S cents. This represented YoY growth of 10.0% and constituted 24.9% of our full-year projection.
Operational trends largely healthy
CRCT’s malls registered robust tenants’ sales growth of 14.3% YoY, exceeding the national retail sales growth of 10.6%. Shopper traffic was up a modest 1.6%. Although management secured positive rental reversions of 12.8% in 1Q15, we note that this was softer than the 20.6%-24.9% rental uplifts recorded from 1Q14 to 4Q14. Overall portfolio occupancy stood at 95.1% as at 31 Mar 2014, a slight 0.7 ppt QoQ decline. This was attributed to continued weakness at CapitaMall Wuhu and CapitaMall Minzhongleyuan, with the former undergoing a tenant repositioning exercise to differentiate from competing malls; and the latter impacted by road closure to facilitate the construction of a subway line.
Reiterate HOLD
CRCT had a healthy gearing ratio of 28.6%, as at 31 Mar 2015 (-0.1 ppt QoQ), with an average cost of debt of 2.99%. 76.7% of its total borrowings are fixed (89.0% if we exclude onshore RMB loans). Looking ahead, management has plans to enhance the competitiveness of its portfolio. It intends to carry out AEI works at CapitaMall Grand Canyon (upgrading of toilets and car park) and CapitaMall Wangjing (enhance accessibility and rejuvenate mall’s façade). We retain our forecasts, HOLD rating and S$1.64 fair value estimate on CRCT given this in-line set of results. The stock is currently trading at FY15F distribution yield of 6.1% and P/B ratio of 1.08x.
CapitaRetail China Trust (CRCT) reported 1Q15 results which came in within our expectations. Gross revenue jumped 8.1% YoY in CNY terms to CNY250.4m, driven by rental growth from its multi-tenanted malls. Due to a stronger CNY vis-à-vis the SGD, CRCT’s gross revenue jumped 13.3% YoY to S$54.5m and this formed 25.4% of our FY15 forecast. Similarly, CRCT’s NPI increased 1.9% YoY in CNY terms to CNY158.6m, but growth was stronger at 6.8% in SGD terms to S$34.5m. DPU for 1Q15 came in at 2.64 S cents. This represented YoY growth of 10.0% and constituted 24.9% of our full-year projection.
Operational trends largely healthy
CRCT’s malls registered robust tenants’ sales growth of 14.3% YoY, exceeding the national retail sales growth of 10.6%. Shopper traffic was up a modest 1.6%. Although management secured positive rental reversions of 12.8% in 1Q15, we note that this was softer than the 20.6%-24.9% rental uplifts recorded from 1Q14 to 4Q14. Overall portfolio occupancy stood at 95.1% as at 31 Mar 2014, a slight 0.7 ppt QoQ decline. This was attributed to continued weakness at CapitaMall Wuhu and CapitaMall Minzhongleyuan, with the former undergoing a tenant repositioning exercise to differentiate from competing malls; and the latter impacted by road closure to facilitate the construction of a subway line.
Reiterate HOLD
CRCT had a healthy gearing ratio of 28.6%, as at 31 Mar 2015 (-0.1 ppt QoQ), with an average cost of debt of 2.99%. 76.7% of its total borrowings are fixed (89.0% if we exclude onshore RMB loans). Looking ahead, management has plans to enhance the competitiveness of its portfolio. It intends to carry out AEI works at CapitaMall Grand Canyon (upgrading of toilets and car park) and CapitaMall Wangjing (enhance accessibility and rejuvenate mall’s façade). We retain our forecasts, HOLD rating and S$1.64 fair value estimate on CRCT given this in-line set of results. The stock is currently trading at FY15F distribution yield of 6.1% and P/B ratio of 1.08x.
Monday, 27 April 2015
Wilmar International
UOBKayhian on 27 Apr 2015
FY15F PE (x): 11.3
FY16F PE (x): 10.4
Wilmar is schedule to release its 1Q15 results on 7 May 15 after market closed. 1Q is seasonally lowest quarter. Due to seasonality, Wilmar’s 1Q is usually the weakest quarter. We are expecting a net profit of US$250m to US$300m for 1Q15, which is higher than net core profit of US$214.5m for 1Q14 but lower than US$412.5m for 4Q14. Low season for Sugar. Sugar milling division only contributes in 2H as sugar cane crushing season only starts May in Australia. While sugar merchandising & processing should see higher contribution yoy on higher sales volume (more sugar supplies from Brazil) but flat qoq. Maintain HOLD with higher target price of S$3.65. The target price is derived from sumof-the part valuation and translates into a blended 2015F PE of 12.6x. Entry price is S$3.10.
FY15F PE (x): 11.3
FY16F PE (x): 10.4
Wilmar is schedule to release its 1Q15 results on 7 May 15 after market closed. 1Q is seasonally lowest quarter. Due to seasonality, Wilmar’s 1Q is usually the weakest quarter. We are expecting a net profit of US$250m to US$300m for 1Q15, which is higher than net core profit of US$214.5m for 1Q14 but lower than US$412.5m for 4Q14. Low season for Sugar. Sugar milling division only contributes in 2H as sugar cane crushing season only starts May in Australia. While sugar merchandising & processing should see higher contribution yoy on higher sales volume (more sugar supplies from Brazil) but flat qoq. Maintain HOLD with higher target price of S$3.65. The target price is derived from sumof-the part valuation and translates into a blended 2015F PE of 12.6x. Entry price is S$3.10.
Mapletree Commercial Trust
Kim Eng on 24 Apr 2015
FY3/15 revenue was SGD282.5m (+5.7% YoY) while NPI was SGD211.7m (+8.4% YoY), smack in line with our expectations of SGD282m and SGD212m respectively. Full-year DPU was 8 SGD cts, ahead of our 7.7 cts. Management said NPI could have been stronger if not for higher-than-expected property expenses. As retail demand remains weak, MCT is helping its tenants. Measures include sharing some property-operating costs with tenants. Retail rental reversions remain robust at 17.5%, testament to Vivocty’s unique positioning as a tourist mall with exclusive local catchment. On the office front, Mapletree Anson’s occupancy dropped from 93.8% to 87.5%, given strong supply in the CBD/Tanjong Pagar. Thankfully, the dropped space has since been pre-committed. Occupancy for the rest of its assets was also stable.
Interest costs rising
MCT refinanced SGD288.6m of debt in April, which raised its all-in interest costs to 2.28% from 2.18% in Dec 2014. The move wipes out refinancing needs for FY3/16. For FY3/17, SGD354m debt coming due may be refinanced at higher costs yet again. We have already incorporated this.
Maintain HOLD; upside risk from acquisitions
Though we are positive on MCT’s management and portfolio, valuations are rich at <5% yield. Maintain HOLD with an unchanged DDM TP of SGD1.43 (CoE 7.7%, LTG 2%). Upside risks could include acquisitions from its sponsor’s attractive pipeline of assets – Mapletree Business City, Harbourfront Centre and Towers 1 & 2.
- FY3/15 DPU in line.
- Interest costs well managed but rising, nonetheless.
- Maintain HOLD with unchanged DDM TP of SGD1.43 (CoE 7.7%, LTG 2%).
FY3/15 revenue was SGD282.5m (+5.7% YoY) while NPI was SGD211.7m (+8.4% YoY), smack in line with our expectations of SGD282m and SGD212m respectively. Full-year DPU was 8 SGD cts, ahead of our 7.7 cts. Management said NPI could have been stronger if not for higher-than-expected property expenses. As retail demand remains weak, MCT is helping its tenants. Measures include sharing some property-operating costs with tenants. Retail rental reversions remain robust at 17.5%, testament to Vivocty’s unique positioning as a tourist mall with exclusive local catchment. On the office front, Mapletree Anson’s occupancy dropped from 93.8% to 87.5%, given strong supply in the CBD/Tanjong Pagar. Thankfully, the dropped space has since been pre-committed. Occupancy for the rest of its assets was also stable.
Interest costs rising
MCT refinanced SGD288.6m of debt in April, which raised its all-in interest costs to 2.28% from 2.18% in Dec 2014. The move wipes out refinancing needs for FY3/16. For FY3/17, SGD354m debt coming due may be refinanced at higher costs yet again. We have already incorporated this.
Maintain HOLD; upside risk from acquisitions
Though we are positive on MCT’s management and portfolio, valuations are rich at <5% yield. Maintain HOLD with an unchanged DDM TP of SGD1.43 (CoE 7.7%, LTG 2%). Upside risks could include acquisitions from its sponsor’s attractive pipeline of assets – Mapletree Business City, Harbourfront Centre and Towers 1 & 2.
Ascendas REIT
Kim Eng on 24 Apr 2015
FY3/15 revenue was SGD673.5m (+9.8% YoY) and NPI, SGD462.7m (+6.1% YoY), vs our respective SGD677.3m and SGD462.3m. Full year DPU was 14.6 SGD cts vs our 14.9 cts, slightly below. Occupancies for factories and warehouses (60% NPI) dropped QoQ – hi-spec 88.9% to 88.5%, light industrial 93% to 92.5%, and warehouses 86.5% to 85.8% - underscoring our concerns of oversupply/weak demand. Business parks (35% NPI) occupancy improved from 88% to 88.7%. Integrated development segment contributed strongly as Aperia ramped up occupancy from 54% to 80%. Portfolio rental reversions have trended lower third year running, from 14% to 10%, now 8.3%.
Challenging times
Factories and warehouses are likely to continue to see soft occupancies and weak rental reversions. Business parks had a solid quarter but as 2016 supply is largely uncommitted, this segment could waver. Integrated segment looks set to increase NPI contribution from 4.4% to 7.4% powered by Aperia’s high quality specs and good location.
Consensus could be disappointed; Maintain SELL
We do not expect business parks or the Aperia to be adequate buffers for factories and warehouses. Also, we expect NPI margin compression as A-reit’s proportion of multi-tenanted buildings has increased from 62% to 71%. We reduce our FY3/16 DPU from 15.1 SGD cts to 14.8, no change for our FY3/17-18 forecasts. Maintain SELL with a DDM TP SGD 2.27.
- FY3/15 DPU slightly below on lower than expected warehouse contributions. Reduce FY3/16 DPU by 2%.
- Occupancies for factories and warehouses dropped QoQ.
- Maintain SELL on soft occupancy and weaker rental reversions. DDM TP SGD2.27 unchanged (CoE 8.5%, LTG 2%).
FY3/15 revenue was SGD673.5m (+9.8% YoY) and NPI, SGD462.7m (+6.1% YoY), vs our respective SGD677.3m and SGD462.3m. Full year DPU was 14.6 SGD cts vs our 14.9 cts, slightly below. Occupancies for factories and warehouses (60% NPI) dropped QoQ – hi-spec 88.9% to 88.5%, light industrial 93% to 92.5%, and warehouses 86.5% to 85.8% - underscoring our concerns of oversupply/weak demand. Business parks (35% NPI) occupancy improved from 88% to 88.7%. Integrated development segment contributed strongly as Aperia ramped up occupancy from 54% to 80%. Portfolio rental reversions have trended lower third year running, from 14% to 10%, now 8.3%.
Challenging times
Factories and warehouses are likely to continue to see soft occupancies and weak rental reversions. Business parks had a solid quarter but as 2016 supply is largely uncommitted, this segment could waver. Integrated segment looks set to increase NPI contribution from 4.4% to 7.4% powered by Aperia’s high quality specs and good location.
Consensus could be disappointed; Maintain SELL
We do not expect business parks or the Aperia to be adequate buffers for factories and warehouses. Also, we expect NPI margin compression as A-reit’s proportion of multi-tenanted buildings has increased from 62% to 71%. We reduce our FY3/16 DPU from 15.1 SGD cts to 14.8, no change for our FY3/17-18 forecasts. Maintain SELL with a DDM TP SGD 2.27.
Suntec REIT
OCBC on 24 Apr 2015
Suntec REIT reported 1Q15 revenue of S$74.5m, an increase of 12.9% YoY. However, DPU was flat at 2.23 S cents and fell short of ours and the street’s expectations. Although committed occupancy for Suntec City mall’s Phase 3 AEI improved from 70.5% to 80%, we believe leasing momentum has been sluggish as it is slated to open soon. Rental rates have also come under pressure for this mall. On a positive note, Suntec REIT’s office segment remains stable, and management is confident of the performance of this segment for the remainder of the year. Given the slow start to FY15, we see the need to pare our FY15 revenue/DPU forecasts by 4.0%/4.9%, and our FY16 revenue/DPU projections by 4.4%/4.9%. Consequently, we lower our DDM-derived fair value estimate from S$1.86 to S$1.72. Maintain HOLD on Suntec REIT. The stock is currently trading at FY15F distribution yield of 5.3%.
1Q15 results fell short of expectations
Suntec REIT reported 1Q15 revenue of S$74.5m, an increase of 12.9% YoY. This was largely driven by completion of Phase 2 of the AEI at Suntec City mall in Jun 2014 and stronger contribution from Suntec Singapore Convention & Exhibition Centre. Although distributable income jumped 10.1% YoY to S$56.0m, DPU was flat at 2.23 S cents and fell short of ours and the street’s expectations, forming 21.7% of our FY15 projection and 22.1% of Bloomberg consensus estimates.
Retail leasing momentum still sluggish
Suntec REIT received TOP for its Suntec City mall Phase 3 AEI in Feb this year, and most tenants are carrying out fit-out works now. Despite the fact that Phase 3 will be opening soon, the committed occupancy rate stands at ~80%, although this is an improvement from the 70.5% figure recorded at end-2014. Leasing momentum has been sluggish, in our view. Overall committed passing rents for Suntec City mall is currently at the S$12.15 psf per month level (on a stabilised basis), below its initial target of S$12.59 psf per month and also a decline from the S$12.27 psf per month registered in 4Q14. A silver lining though, is that majority of the un-leased space at Phase 3 is on the ground level, which tends to fetch higher rental rates. Suntec City’s office segment remained stable, with committed occupancy at 99.6% and leases secured in 1Q15 came in at S$9.24 psf per month, higher than in 4Q14 (S$8.92 psf per month). Management remains confident of the performance of this segment for the remainder of the year.
Maintain HOLD
Given the slow start to FY15, we see the need to pare our FY15 revenue/DPU forecasts by 4.0%/4.9%, and our FY16 revenue/DPU projections by 4.4%/4.9%. Consequently, we lower our DDM-derived fair value estimate from S$1.86 to S$1.72. Maintain HOLD on Suntec REIT. The stock is currently trading at FY15F distribution yield of 5.3%.
Suntec REIT reported 1Q15 revenue of S$74.5m, an increase of 12.9% YoY. This was largely driven by completion of Phase 2 of the AEI at Suntec City mall in Jun 2014 and stronger contribution from Suntec Singapore Convention & Exhibition Centre. Although distributable income jumped 10.1% YoY to S$56.0m, DPU was flat at 2.23 S cents and fell short of ours and the street’s expectations, forming 21.7% of our FY15 projection and 22.1% of Bloomberg consensus estimates.
Retail leasing momentum still sluggish
Suntec REIT received TOP for its Suntec City mall Phase 3 AEI in Feb this year, and most tenants are carrying out fit-out works now. Despite the fact that Phase 3 will be opening soon, the committed occupancy rate stands at ~80%, although this is an improvement from the 70.5% figure recorded at end-2014. Leasing momentum has been sluggish, in our view. Overall committed passing rents for Suntec City mall is currently at the S$12.15 psf per month level (on a stabilised basis), below its initial target of S$12.59 psf per month and also a decline from the S$12.27 psf per month registered in 4Q14. A silver lining though, is that majority of the un-leased space at Phase 3 is on the ground level, which tends to fetch higher rental rates. Suntec City’s office segment remained stable, with committed occupancy at 99.6% and leases secured in 1Q15 came in at S$9.24 psf per month, higher than in 4Q14 (S$8.92 psf per month). Management remains confident of the performance of this segment for the remainder of the year.
Maintain HOLD
Given the slow start to FY15, we see the need to pare our FY15 revenue/DPU forecasts by 4.0%/4.9%, and our FY16 revenue/DPU projections by 4.4%/4.9%. Consequently, we lower our DDM-derived fair value estimate from S$1.86 to S$1.72. Maintain HOLD on Suntec REIT. The stock is currently trading at FY15F distribution yield of 5.3%.
Ascendas REIT
OCBC on 24 Apr 2015
Ascendas REIT (A-REIT) showcased its resilience by reporting a 4.5% YoY growth for its 4QFY15 DPU to 3.71 S cents. This came on the back of a 11.0% increase in gross revenue to S$173.8m. Results were in-line with our expectations. During the quarter, A-REIT delivered a 4.4% increase for its renewal rates. Looking ahead, management has guided for mid-single digit rental reversion for FY16, although gap is narrowing between A-REIT’s passing rents and current market rents. A-REIT ended the financial year with overall portfolio occupancy of 87.7% (versus 86.8% as at 31 Dec 2014). We fine-tune our assumptions and as we roll forward our valuations, our DDM-derived fair value estimate on A-REIT is boosted from S$2.43 to S$2.49. However, given A-REIT’s strong share price performance YTD, we see limited total potential returns of 2% at this juncture. Hence, we maintain HOLD on A-REIT, which is currently trading at FY15F 1.24x P/B ratio with a distribution yield of 5.9%.
4QFY15 results came in within our expectations
Ascendas REIT (A-REIT) showcased its resilience by reporting a 4.5% YoY growth for its 4QFY15 DPU to 3.71 S cents. This came on the back of a 11.0% increase in gross revenue to S$173.8m. Results were in-line with our expectations and were underpinned by contribution from new acquisitions as well as higher occupancy and positive rental uplifts on renewals at certain properties. For FY15, A-REIT’s gross revenue jumped 9.8% to S$673.5m, or 1.6% above our forecast. DPU of 14.6 S cents represented a slight growth of 2.5%, and was 1.1% ahead of our estimate.
Still expecting positive rental reversions
During the quarter, A-REIT delivered a 4.4% increase for its renewal rates, which was achieved by broad-based growth across all segments. Nevertheless, we note that this was a moderation from the 8.3% positive rental reversion figure for all leases renewed in FY15. Looking ahead, management has guided for mid-single digit rental reversion for FY16, as the weighted average passing rent for most of A-REIT’s multi-tenanted space which are due for renewal in FY16 are still below current market rents, although the gap is narrowing. A-REIT ended the financial year with overall portfolio occupancy of 87.7% (versus 86.8% as at 31 Dec 2014). Although A-REIT has ten single-tenanted building (SLB) leases expiring in FY16, as compared to eight during FY15, the combined space up for renewal for the FY16 leases is 44% smaller than those of FY15. Moreover, management believes most of these SLB leases would be renewed, as compared to being converted into multi-tenanted buildings. Hence, there would be less pressure on A-REIT’s occupancy rates.
Maintain HOLD
We fine-tune our assumptions and as we roll forward our valuations, our DDM-derived fair value estimate on A-REIT is boosted from S$2.43 to S$2.49. However, given A-REIT’s strong share price performance YTD, we see limited total potential returns of 2% at this juncture. Hence, we maintain HOLD on A-REIT, which is currently trading at FY15F 1.24x P/B ratio with a distribution yield of 5.9%.
Ascendas REIT (A-REIT) showcased its resilience by reporting a 4.5% YoY growth for its 4QFY15 DPU to 3.71 S cents. This came on the back of a 11.0% increase in gross revenue to S$173.8m. Results were in-line with our expectations and were underpinned by contribution from new acquisitions as well as higher occupancy and positive rental uplifts on renewals at certain properties. For FY15, A-REIT’s gross revenue jumped 9.8% to S$673.5m, or 1.6% above our forecast. DPU of 14.6 S cents represented a slight growth of 2.5%, and was 1.1% ahead of our estimate.
Still expecting positive rental reversions
During the quarter, A-REIT delivered a 4.4% increase for its renewal rates, which was achieved by broad-based growth across all segments. Nevertheless, we note that this was a moderation from the 8.3% positive rental reversion figure for all leases renewed in FY15. Looking ahead, management has guided for mid-single digit rental reversion for FY16, as the weighted average passing rent for most of A-REIT’s multi-tenanted space which are due for renewal in FY16 are still below current market rents, although the gap is narrowing. A-REIT ended the financial year with overall portfolio occupancy of 87.7% (versus 86.8% as at 31 Dec 2014). Although A-REIT has ten single-tenanted building (SLB) leases expiring in FY16, as compared to eight during FY15, the combined space up for renewal for the FY16 leases is 44% smaller than those of FY15. Moreover, management believes most of these SLB leases would be renewed, as compared to being converted into multi-tenanted buildings. Hence, there would be less pressure on A-REIT’s occupancy rates.
Maintain HOLD
We fine-tune our assumptions and as we roll forward our valuations, our DDM-derived fair value estimate on A-REIT is boosted from S$2.43 to S$2.49. However, given A-REIT’s strong share price performance YTD, we see limited total potential returns of 2% at this juncture. Hence, we maintain HOLD on A-REIT, which is currently trading at FY15F 1.24x P/B ratio with a distribution yield of 5.9%.
Thursday, 23 April 2015
CapitaCommercial Trust
UOBKayhian on 23 Apr 2015
FY15F PE (x): 18.8
FY16F PE (x): 17.1
Results in line with expectations. CapitaCommercial Trust (CCT) reported 1QFY15 DPU of 2.12 cents, up 3.9% yoy, supported by positive rent reversions and improved occupancies across its portfolio. Results were in line with our expectations, accounting for 24.7% of our full-year DPU estimate of 8.6 cents. Securing 76.4% pre-commitment for CapitaGreen (4Q14: 69% 3Q14: 40%, 2Q14:23%) and targeting full occupancy by end-15. Capitagreen achieved rents in the S$12-16psf pm range during the quarter. Tenants span diverse sectors, including financial services, insurance, commodities, legal, technology, real estate, health and fitness, and food & beverage. Management highlighted that insurance companies took the lion’s share of committed office space. In what may seem to be a developing trend, firms in the technology, media and telecommunications (TMT) sector have taken up a significant portion of committed office space. Maintain BUY and target price of S$2.05, based on DDM (required rate of return: 7.2%, terminal growth: 2.2%).
FY15F PE (x): 18.8
FY16F PE (x): 17.1
Results in line with expectations. CapitaCommercial Trust (CCT) reported 1QFY15 DPU of 2.12 cents, up 3.9% yoy, supported by positive rent reversions and improved occupancies across its portfolio. Results were in line with our expectations, accounting for 24.7% of our full-year DPU estimate of 8.6 cents. Securing 76.4% pre-commitment for CapitaGreen (4Q14: 69% 3Q14: 40%, 2Q14:23%) and targeting full occupancy by end-15. Capitagreen achieved rents in the S$12-16psf pm range during the quarter. Tenants span diverse sectors, including financial services, insurance, commodities, legal, technology, real estate, health and fitness, and food & beverage. Management highlighted that insurance companies took the lion’s share of committed office space. In what may seem to be a developing trend, firms in the technology, media and telecommunications (TMT) sector have taken up a significant portion of committed office space. Maintain BUY and target price of S$2.05, based on DDM (required rate of return: 7.2%, terminal growth: 2.2%).
Mapletree Industrial Trust
Kim Eng on 23 Apr 2015
Slightly better than expected
MIT reported a 5.6% and 4.9% YoY rise in quarterly and full-year revenue to SGD79.4m and SGD313.9m respectively, while respective NPI rose 8.4% and 6.5% to SGD57.8m and SGD228.6m. DPU for the year was 10.4 SGD cts, up 5.1%, exactly our forecast. However, core occupancy fell to 90.2%, its third straight quarter of decline. This underscored oversupply/weak demand in the industrial space. Interest cost rose 10bps to 2.3%, mainly from 13% of loans as variable pegged to the SOR. Gearing was down to 30.6% from 32.8% on property revaluation gains of SGD197m.
BTS projects phase in earlier than expected
BTS-Equinix attained TOP much earlier than expected and contributed a month of revenue. We therefore look forward to full year contribution in FY3/16. BTS-Hewlett Packard Phase 1 should also be completed by end-2016 and Phase 2, by mid-2017. MIT’s BTS projects are pre-committed buildings with long leases and annual rental step-ups.
Reiterate BUY
While we remain Underweight on industrial SREITs due to strong supply and a weak economy, MIT remains a BUY as it phases in its BTS earnings. This should more than offset vacancy risks and provide DPU growth visibility. Fully operational, we expect both projects to contribute SGD38m or 10.3% to revenue by FY3/18. Maintain BUY with TP raised from SGD 1.74 to SGD 1.77 (DDM, CoE 8.5%, LTG 2%) after raising our FY3/16-18 DPU by up to 3.3%.
- 4Q15 beat marginally. BTS-Equinix contributed earlier than expected. FY3/16-18 DPU raised by up to 3.3%.
- Two BTS projects to drive DPU, compensating supply risks. Reiterate BUY. Attractive 7.7% FY3/18 yields. Raise DDM TP to SGD1.77 from SGD1.74.
Slightly better than expected
MIT reported a 5.6% and 4.9% YoY rise in quarterly and full-year revenue to SGD79.4m and SGD313.9m respectively, while respective NPI rose 8.4% and 6.5% to SGD57.8m and SGD228.6m. DPU for the year was 10.4 SGD cts, up 5.1%, exactly our forecast. However, core occupancy fell to 90.2%, its third straight quarter of decline. This underscored oversupply/weak demand in the industrial space. Interest cost rose 10bps to 2.3%, mainly from 13% of loans as variable pegged to the SOR. Gearing was down to 30.6% from 32.8% on property revaluation gains of SGD197m.
BTS projects phase in earlier than expected
BTS-Equinix attained TOP much earlier than expected and contributed a month of revenue. We therefore look forward to full year contribution in FY3/16. BTS-Hewlett Packard Phase 1 should also be completed by end-2016 and Phase 2, by mid-2017. MIT’s BTS projects are pre-committed buildings with long leases and annual rental step-ups.
Reiterate BUY
While we remain Underweight on industrial SREITs due to strong supply and a weak economy, MIT remains a BUY as it phases in its BTS earnings. This should more than offset vacancy risks and provide DPU growth visibility. Fully operational, we expect both projects to contribute SGD38m or 10.3% to revenue by FY3/18. Maintain BUY with TP raised from SGD 1.74 to SGD 1.77 (DDM, CoE 8.5%, LTG 2%) after raising our FY3/16-18 DPU by up to 3.3%.
CapitaCommercial Trust
Kim Eng on 23 Apr 2015
1Q15 DPU of 2.12 SGD cts (+3.9% YoY) met at 24% of our FY15E. Occupancy improved to 97.0% from 96.8% in 4Q14. Average office rents were up 2.0% to SGD8.78 psf. Leverage remained low at 29.9% with debt headroom of SGD1.2b to a 40% ratio. This implies it can comfortably purchase the remaining 60% of CapitaGreen without raising equity. Average interest cost climbed to 2.4% from 2.3% in 4Q14. Still, the trust has low exposure to rising interest rates as 83% of its borrowings are on fixed rates.
CapitaGreen 76.4% committed
As of 21 Apr, 76.4% of CapitaGreen has been committed. Committed rents of SGD12-16 psf were broadly higher than 4Q14’s SGD9-16 psf and market rents of SGD11.40 psf for Grade A office space, as estimated by CBRE.
Most expensive office REIT
Maintain HOLD and DDM-based (COE 7.7%, TG 2.0%) TP of SGD1.77. While its option to acquire the rest of CapitaGreen from its JV partners is positive, the deal can only be assessed after the determination of its transaction price. Moreover, we believe the market has priced in potential positives at 1.0x P/BV and 5.2% FY15E yields. CCT is the most expensive office REIT. We prefer laggard Keppel REIT (BUY, TP SGD1.32) in the office sector.
- 1Q15 DPU in line at 24% of FY15E. Better portfolio occupancy. 2% rental uptick. CapitaGreen now 76.4% committed at better rents.
- Option to acquire remainder of CapitaGreen priced in. Most expensive office REIT.
- Maintain HOLD with DDM-based TP of SGD1.77. Prefer Keppel REIT in office sector.
1Q15 DPU of 2.12 SGD cts (+3.9% YoY) met at 24% of our FY15E. Occupancy improved to 97.0% from 96.8% in 4Q14. Average office rents were up 2.0% to SGD8.78 psf. Leverage remained low at 29.9% with debt headroom of SGD1.2b to a 40% ratio. This implies it can comfortably purchase the remaining 60% of CapitaGreen without raising equity. Average interest cost climbed to 2.4% from 2.3% in 4Q14. Still, the trust has low exposure to rising interest rates as 83% of its borrowings are on fixed rates.
CapitaGreen 76.4% committed
As of 21 Apr, 76.4% of CapitaGreen has been committed. Committed rents of SGD12-16 psf were broadly higher than 4Q14’s SGD9-16 psf and market rents of SGD11.40 psf for Grade A office space, as estimated by CBRE.
Most expensive office REIT
Maintain HOLD and DDM-based (COE 7.7%, TG 2.0%) TP of SGD1.77. While its option to acquire the rest of CapitaGreen from its JV partners is positive, the deal can only be assessed after the determination of its transaction price. Moreover, we believe the market has priced in potential positives at 1.0x P/BV and 5.2% FY15E yields. CCT is the most expensive office REIT. We prefer laggard Keppel REIT (BUY, TP SGD1.32) in the office sector.
Cache Logistics Trust
Kim Eng on 23 Apr 2015
1Q15 revenue was SGD21m (+1.6% YoY, +1.9% QoQ). NPI was SGD19.7m (+0.6% YoY, +1.6% QoQ). NPI growth lagged revenue on rising property-operating expenses, as landlords do more for tenants in a tough leasing environment. Respectively, revenue and NPI were 23.7% and 23.6% of our FY15. Australian acquisitions will contribute a full quarter from 2Q15, which should put it on track for our full-year expectations. Annualised DPU of 8.7 SGD cts almost matches our projection of 8.6 SGD cts.
Prudent interest-cost management
All-in interest costs dropped from 3.3% in 4Q14 to 2.77% in 1Q15 after refinancing. Cache also hedged more debt with fixed rates, up from 61.7% to 71%. It has no refinancing needs till 2017 when SGD97m will come due, at about 20% total debt.
BUY for DPU resilience
Some 74% of NPI remains tied to single-tenanted master leases. These provide income predictability in an environment of strong supply/weak demand. Cache has the lowest tenant lease expiries among industrial SREITs under our coverage: 9%/15%/3% for the next three years. Annual rental step-ups of 1-3.5% provide certain organic growth, while next year’s BTS project for DHL should contribute to DPU growth of 5.7%. Maintain BUY with DDM TP intact. We consider Cache undervalued to peers as its earnings quality is high and risks, lower.
- No surprises with 1Q15 NPI and DPU in line.
- Interest costs fell on prudent debt management.
- Reiterate BUY with catalysts from resilience & clear DPU growth in 2016. DDM TP still at SGD1.33 (CoE 8.5%, LTG 2%).
1Q15 revenue was SGD21m (+1.6% YoY, +1.9% QoQ). NPI was SGD19.7m (+0.6% YoY, +1.6% QoQ). NPI growth lagged revenue on rising property-operating expenses, as landlords do more for tenants in a tough leasing environment. Respectively, revenue and NPI were 23.7% and 23.6% of our FY15. Australian acquisitions will contribute a full quarter from 2Q15, which should put it on track for our full-year expectations. Annualised DPU of 8.7 SGD cts almost matches our projection of 8.6 SGD cts.
Prudent interest-cost management
All-in interest costs dropped from 3.3% in 4Q14 to 2.77% in 1Q15 after refinancing. Cache also hedged more debt with fixed rates, up from 61.7% to 71%. It has no refinancing needs till 2017 when SGD97m will come due, at about 20% total debt.
BUY for DPU resilience
Some 74% of NPI remains tied to single-tenanted master leases. These provide income predictability in an environment of strong supply/weak demand. Cache has the lowest tenant lease expiries among industrial SREITs under our coverage: 9%/15%/3% for the next three years. Annual rental step-ups of 1-3.5% provide certain organic growth, while next year’s BTS project for DHL should contribute to DPU growth of 5.7%. Maintain BUY with DDM TP intact. We consider Cache undervalued to peers as its earnings quality is high and risks, lower.
CapitaCommercial Trust
OCBC on 23 Apr 2015
CapitaCommercial Trust (CCT) reported 1Q15 distributable income and net property income of S$62.8m and S$54.0m which increased 4.7% and 6.4% YoY, respectively. Distribution per unit for the quarter is announced to be an estimated 2.12 S-cents, up 3.9% YoY versus 2.04 S-cents for 1Q14. We judge this set of results to be within expectations, as distributable income and net property income from the quarter forms 24.2% and 23.7% of our full year forecast, respectively. In terms of the topline, the trust’s 1Q15 revenues similarly increased 6.5% YoY to S$68.2m mostly due to higher rentals and occupancy rates across its office portfolio. Including the newly completed CapitaGreen, the trust reports a healthy overall occupancy rate of 97.0% and continued positive rental reversion trends for its Grade A office leases committed over the quarter (average portfolio rental up 2.0% QoQ to S$8.78 psf). Our fair value estimate of CCT remains unchanged at S$1.67. Since we downgraded the counter to a Sell rating on 22 Jan 2015, the share price has fallen 8.2% and we now upgrade to HOLD on valuation grounds.
1Q15 numbers broadly in line
CapitaCommercial Trust (CCT) reported 1Q15 distributable income and net property income of S$62.8m and S$54.0m which increased 4.7% and 6.4% YoY, respectively. Distribution per unit for the quarter is announced to be an estimated 2.12 S-cents, up 3.9% YoY versus 2.04 S-cents for 1Q14. We judge this set of results to be within expectations, as distributable income and net property income from the quarter forms 24.2% and 23.7% of our full year forecast, respectively. In terms of the topline, the trust’s 1Q15 revenues similarly increased 6.5% YoY to S$68.2m mostly due to higher rentals and occupancy rates across its office portfolio.
Portfolio rentals holding firm
Management reported continued positive rental reversion trends for its Grade A office leases committed over the quarter, and average portfolio rental increased 2.0% QoQ to S$8.78 psf, with 6 Battery Rd and One George St achieving monthly rents between S$11.00 psf to S$14.60 psf, and CapitaGreen between S$12.00 to S$16.00 psf. Including the newly completed CapitaGreen, the trust reports a healthy overall occupancy rate of 97.0%. As at end 1Q15, CapitaGreen was 76.4% committed, up from 69.3% from at last quarter, and we understand management targets to achieve full occupancy by the end of the fiscal year.
Upgrade to HOLD on valuation grounds
CCT’s balance sheet remain healthy with gearing at 29.9% as at end 1Q15 and an average cost of debt of 2.4%. We note that the trust has a debt headroom of S$1.2b assuming a 40% gearing, and is holding a call option to buy the 60% remaining interest in CapitaGreen from 2015-17. Our fair value estimate of CCT remains unchanged at S$1.67. Since we downgraded the counter to a Sell rating on 22 Jan 2015, the share price has fallen 8.2% and we now upgrade to HOLD on valuation grounds.
CapitaCommercial Trust (CCT) reported 1Q15 distributable income and net property income of S$62.8m and S$54.0m which increased 4.7% and 6.4% YoY, respectively. Distribution per unit for the quarter is announced to be an estimated 2.12 S-cents, up 3.9% YoY versus 2.04 S-cents for 1Q14. We judge this set of results to be within expectations, as distributable income and net property income from the quarter forms 24.2% and 23.7% of our full year forecast, respectively. In terms of the topline, the trust’s 1Q15 revenues similarly increased 6.5% YoY to S$68.2m mostly due to higher rentals and occupancy rates across its office portfolio.
Portfolio rentals holding firm
Management reported continued positive rental reversion trends for its Grade A office leases committed over the quarter, and average portfolio rental increased 2.0% QoQ to S$8.78 psf, with 6 Battery Rd and One George St achieving monthly rents between S$11.00 psf to S$14.60 psf, and CapitaGreen between S$12.00 to S$16.00 psf. Including the newly completed CapitaGreen, the trust reports a healthy overall occupancy rate of 97.0%. As at end 1Q15, CapitaGreen was 76.4% committed, up from 69.3% from at last quarter, and we understand management targets to achieve full occupancy by the end of the fiscal year.
Upgrade to HOLD on valuation grounds
CCT’s balance sheet remain healthy with gearing at 29.9% as at end 1Q15 and an average cost of debt of 2.4%. We note that the trust has a debt headroom of S$1.2b assuming a 40% gearing, and is holding a call option to buy the 60% remaining interest in CapitaGreen from 2015-17. Our fair value estimate of CCT remains unchanged at S$1.67. Since we downgraded the counter to a Sell rating on 22 Jan 2015, the share price has fallen 8.2% and we now upgrade to HOLD on valuation grounds.
Singapore Exchange
OCBC on 23 Apr 2015
Singapore Exchange (SGX) posted 3QFY15 net earnings of S$88.2m, up 16% YoY or 2% QoQ. Derivatives Revenue is now 40.0% of total earnings versus 31.6% a year ago. Management shared that the Taiwan trading link is not scheduled to start in July this year, and likely to start in 1H 2016. Trading activities have picked up strongly since the start of April, and taking this and the still positive outlook for its Derivatives businesses into account, we are raising our fair value estimate from S$7.52 to S$7.95. Dividend yield is still decent at 3.3% based on current price. Maintain HOLD.
Delivered 3QFY15 earnings of S$88m
Singapore Exchange posted 3QFY15 net earnings of S$88.2m, up 16% YoY or 2% QoQ. Derivatives Revenue is now 40.0% of total earnings versus 31.6% a year ago. The reverse was seen for its Securities Revenue, which fell from 31.6% of group revenue last year to 26.5% this quarter. For its Derivatives business, revenue grew 52% YoY to S$79.7m this quarter versus an almost flat growth of 1% for its Securities businesses. Growth for its Derivatives Revenue was driven by robust trading for the SGX FTSE China A50 Index futures and the CNX India Nifty Index futures.
No trading links for now
In addition to its recent announcement that it is not currently in the process of establishing a link similar to the Shanghai-HK connect, management further shared at its result briefing that the Taiwan trading link is not scheduled to start in July this year, and that the link is likely to start in 1H 2016 noting that it is not easy to connect markets.
Good start to SGX’s final quarter
Trading activities have picked up since the start of April, the final quarter for SGX. As a comparison, average daily trading volume in April is in excess of 2.7 billion per day versus the average of 1.4 billion in the first three months of 2015, up 84%. Similarly, average traded value has also improved, but up a more modest 6%. With many Singapore-listed companies having exposure to China, the recent positive sentiment and momentum in North Asian markets has also positively spilled over to benefit the Singapore bourse.
Maintain HOLD rating
Driven by the recent increase in trading volume and market expectations of further link-ups with overseas bourses, SGX’s stock price has posted good gains. As we have adjusted our FY15 and FY16 forecasts to take into account better trading activities in the final quarter and the positive outlook for its Derivatives businesses, we are raising our fair value estimate from S$7.52 to S$7.95. Dividend yield is still decent at 3.3% based on current price. Maintain HOLD.
Singapore Exchange posted 3QFY15 net earnings of S$88.2m, up 16% YoY or 2% QoQ. Derivatives Revenue is now 40.0% of total earnings versus 31.6% a year ago. The reverse was seen for its Securities Revenue, which fell from 31.6% of group revenue last year to 26.5% this quarter. For its Derivatives business, revenue grew 52% YoY to S$79.7m this quarter versus an almost flat growth of 1% for its Securities businesses. Growth for its Derivatives Revenue was driven by robust trading for the SGX FTSE China A50 Index futures and the CNX India Nifty Index futures.
No trading links for now
In addition to its recent announcement that it is not currently in the process of establishing a link similar to the Shanghai-HK connect, management further shared at its result briefing that the Taiwan trading link is not scheduled to start in July this year, and that the link is likely to start in 1H 2016 noting that it is not easy to connect markets.
Good start to SGX’s final quarter
Trading activities have picked up since the start of April, the final quarter for SGX. As a comparison, average daily trading volume in April is in excess of 2.7 billion per day versus the average of 1.4 billion in the first three months of 2015, up 84%. Similarly, average traded value has also improved, but up a more modest 6%. With many Singapore-listed companies having exposure to China, the recent positive sentiment and momentum in North Asian markets has also positively spilled over to benefit the Singapore bourse.
Maintain HOLD rating
Driven by the recent increase in trading volume and market expectations of further link-ups with overseas bourses, SGX’s stock price has posted good gains. As we have adjusted our FY15 and FY16 forecasts to take into account better trading activities in the final quarter and the positive outlook for its Derivatives businesses, we are raising our fair value estimate from S$7.52 to S$7.95. Dividend yield is still decent at 3.3% based on current price. Maintain HOLD.
Frasers Centrepoint Trust
OCBC on 23 Apr 2015
Frasers Centrepoint Trust (FCT) reported gross revenue of S$47.5m and DPU of 2.963 S cents for its 2QFY15 results. This represented YoY growth of 15.9% and 2.9%, respectively, and was in-line with our expectations. Management managed to achieve positive rental reversions of 3.8% for 2QFY15. This was, however, softer than the 7.7% and 6.5% rental reversion figures recorded in 1QFY15 and FY14, respectively. The main drag came from Bedok Point. Overall portfolio occupancy remained resilient at 97.1%. Despite FCT’s strong share price performance YTD, we are reiterating our BUY rating and S$2.27 fair value estimate, which translates into potential total returns of 13.9%. We continue to like FCT for its strong balance sheet (gearing ratio of 28.6%; 87% of total debt hedged or on fixed rate basis) and defensive suburban malls portfolio.
2QFY15 results met our expectations
Frasers Centrepoint Trust (FCT) reported gross revenue of S$47.5m and DPU of 2.963 S cents for its 2QFY15 results. This represented YoY growth of 15.9% and 2.9%, respectively, driven largely by contribution from Changi City Point (CCP), which was acquired on 16 Jun 2014, and higher gross rents (+0.7%-5.0%) from all its other malls. For 1HFY15, FCT’s gross revenue jumped 17.1% to S$94.7m and formed 48.4% of our full-year forecast. DPU rose 6.2% to 5.713 S cents and constituted 48.4% of our FY15 estimate. If we take into account the S$1.4m (~0.15 S cents per unit) of income retained in 1QFY15, which we expect FCT to distribute in 2HFY15, adjusted 1HFY15 DPU would have formed 49.7% of our FY15 projection, well within our expectations.
Resilient performance, but signs of moderation
Management managed to achieve positive rental reversions of 3.8% for 2QFY15. This was, however, softer than the 7.7% and 6.5% rental reversion figures recorded in 1QFY15 and FY14, respectively. The main drag came from Bedok Point (BP), which registered a steep negative reversion of 31.4% due to one specific lease renewal. If we exclude BP, FCT’s rental reversion would have been 5.2%. Overall portfolio occupancy remained resilient at 97.1% (+0.7 ppt QoQ), as there were healthy improvements seen at Northpoint (+2.8 ppt to 99.1%) and BP (+3.4 ppt to 94.2%). The only decline came from CCP, which clocked in a slightly lower occupancy rate of 90.1% (versus 91.7% as at end 31 Dec 2014).
Maintain BUY
FCT, which is one of our top picks within the S-REITs space, has experienced a 10.8% YTD appreciation in its share price, strongly outperforming the FTSE ST REIT Index’s 5.3% increase during the same period. Keeping our forecasts and S$2.27 fair value estimate on FCT intact, we still see potential total returns of 13.9%. Maintain BUY. We continue to like FCT for its strong balance sheet (gearing ratio of 28.6%; 87% of total debt hedged or on fixed rate basis) and defensive suburban malls portfolio.
Frasers Centrepoint Trust (FCT) reported gross revenue of S$47.5m and DPU of 2.963 S cents for its 2QFY15 results. This represented YoY growth of 15.9% and 2.9%, respectively, driven largely by contribution from Changi City Point (CCP), which was acquired on 16 Jun 2014, and higher gross rents (+0.7%-5.0%) from all its other malls. For 1HFY15, FCT’s gross revenue jumped 17.1% to S$94.7m and formed 48.4% of our full-year forecast. DPU rose 6.2% to 5.713 S cents and constituted 48.4% of our FY15 estimate. If we take into account the S$1.4m (~0.15 S cents per unit) of income retained in 1QFY15, which we expect FCT to distribute in 2HFY15, adjusted 1HFY15 DPU would have formed 49.7% of our FY15 projection, well within our expectations.
Resilient performance, but signs of moderation
Management managed to achieve positive rental reversions of 3.8% for 2QFY15. This was, however, softer than the 7.7% and 6.5% rental reversion figures recorded in 1QFY15 and FY14, respectively. The main drag came from Bedok Point (BP), which registered a steep negative reversion of 31.4% due to one specific lease renewal. If we exclude BP, FCT’s rental reversion would have been 5.2%. Overall portfolio occupancy remained resilient at 97.1% (+0.7 ppt QoQ), as there were healthy improvements seen at Northpoint (+2.8 ppt to 99.1%) and BP (+3.4 ppt to 94.2%). The only decline came from CCP, which clocked in a slightly lower occupancy rate of 90.1% (versus 91.7% as at end 31 Dec 2014).
Maintain BUY
FCT, which is one of our top picks within the S-REITs space, has experienced a 10.8% YTD appreciation in its share price, strongly outperforming the FTSE ST REIT Index’s 5.3% increase during the same period. Keeping our forecasts and S$2.27 fair value estimate on FCT intact, we still see potential total returns of 13.9%. Maintain BUY. We continue to like FCT for its strong balance sheet (gearing ratio of 28.6%; 87% of total debt hedged or on fixed rate basis) and defensive suburban malls portfolio.
Cache Logistics Trust
OCBC on 23 Apr 2015
Cache Logistics Trust (CACHE) reported its 1Q15 results which came in within our expectations. Gross revenue climbed 1.6% YoY to S$21.0m while inched up 0.3% to 2.146 S cents. CACHE has placed strong focus on securing new leases for its assets which have been converted from master-leased properties to multi-tenanted properties in Apr this year. Approximately 70% of its leases expiring in FY15 have been pre-committed. Nevertheless, we believe the leasing environment will remain challenging due to supply concerns and uncertain macroeconomic outlook. Given headwinds facing the Singapore industrial sector, CACHE has sought to diversify its operations by completing the acquisition of three distribution warehouses in Australia on 27 Feb this year for a total acquisition cost of A$75.6m. We raise our FY15 and FY16 DPU forecasts by 1.6% and 1.8%, respectively, to account for this development. Our fair value estimate thus increases from S$1.15 to S$1.17. Maintain HOLD.
1Q15 results in-line with expectations
Cache Logistics Trust (CACHE) reported its 1Q15 results which came in within our expectations. Gross revenue climbed 1.6% YoY to S$21.0m but NPI increased at a slower pace of 0.6% to S$19.7m due to higher property maintenance expenses and lease commissions. Consequently, DPU inched up 0.3% to 2.146 S cents. Gross revenue and DPU constituted 25.0% and 25.1% of our FY15 projections, respectively.
Lease negotiations remain as priority
CACHE has placed strong focus on securing new leases for its assets which have been converted from master-leased properties to multi-tenanted properties in Apr this year. These properties are Cache Cold Centre, Cache Changi Districentre 1 and Cache Changi Districentre 2. Approximately 70% of its leases expiring in FY15 have been pre-committed, an improvement compared to the 65% pre-commitment level as at 31 Dec 2014. Hence, only 9% of its portfolio lettable area is up for renewal in FY15, versus 11% as at end-2014. Nevertheless, we believe the leasing environment will remain challenging due to supply concerns and uncertain macroeconomic outlook. Colliers International expects rents to soften due to higher supply of warehouse space, while cost pressures will also be an issue.
Full quarter contribution from Australia assets to come
Given headwinds facing the Singapore industrial sector, CACHE has sought to diversify its operations by completing the acquisition of three distribution warehouses in Australia on 27 Feb this year for a total acquisition cost of A$75.6m. This marks its maiden entry into Australia, with a full quarter of contribution to come from 2Q15. The three properties are located on freehold land and in established locations. The initial NPI yields range from 7% to 8.6% and we expect it to be immediately DPU accretive to CACHE since the acquisitions are fully debt-funded. We raise our FY15 and FY16 DPU forecasts by 1.6% and 1.8%, respectively, to account for this development. Our fair value estimate thus increases from S$1.15 to S$1.17. However, we are keeping our HOLD rating on CACHE given the limited total potential returns of 4.7%.
Cache Logistics Trust (CACHE) reported its 1Q15 results which came in within our expectations. Gross revenue climbed 1.6% YoY to S$21.0m but NPI increased at a slower pace of 0.6% to S$19.7m due to higher property maintenance expenses and lease commissions. Consequently, DPU inched up 0.3% to 2.146 S cents. Gross revenue and DPU constituted 25.0% and 25.1% of our FY15 projections, respectively.
Lease negotiations remain as priority
CACHE has placed strong focus on securing new leases for its assets which have been converted from master-leased properties to multi-tenanted properties in Apr this year. These properties are Cache Cold Centre, Cache Changi Districentre 1 and Cache Changi Districentre 2. Approximately 70% of its leases expiring in FY15 have been pre-committed, an improvement compared to the 65% pre-commitment level as at 31 Dec 2014. Hence, only 9% of its portfolio lettable area is up for renewal in FY15, versus 11% as at end-2014. Nevertheless, we believe the leasing environment will remain challenging due to supply concerns and uncertain macroeconomic outlook. Colliers International expects rents to soften due to higher supply of warehouse space, while cost pressures will also be an issue.
Full quarter contribution from Australia assets to come
Given headwinds facing the Singapore industrial sector, CACHE has sought to diversify its operations by completing the acquisition of three distribution warehouses in Australia on 27 Feb this year for a total acquisition cost of A$75.6m. This marks its maiden entry into Australia, with a full quarter of contribution to come from 2Q15. The three properties are located on freehold land and in established locations. The initial NPI yields range from 7% to 8.6% and we expect it to be immediately DPU accretive to CACHE since the acquisitions are fully debt-funded. We raise our FY15 and FY16 DPU forecasts by 1.6% and 1.8%, respectively, to account for this development. Our fair value estimate thus increases from S$1.15 to S$1.17. However, we are keeping our HOLD rating on CACHE given the limited total potential returns of 4.7%.
Mapletree Industrial Trust
OCBC on 22 Apr 2015
Mapletree Industrial Trust (MIT) reported a decent set of 4QFY15 results which was in-line with our expectations. Gross revenue and DPU both grew 5.6% YoY to S$79.4m and 2.65 S cents, respectively. Looking ahead, management acknowledged that its existing rents are close to market rents. Hence we expect its positive rental reversion trend to moderate further. MIT’s overall portfolio occupancy inched down from 90.8% (as at 31 Dec 2014) to 90.2% as at end FY15. Its balance sheet remains healthy, with an aggregate leverage ratio of 30.6%, while its interest rate hedge ratio now stands at 87%. We raise our DPU forecasts for FY16 and FY17 by 2% and 2.2%, respectively. Rolling forward our valuations, we bump up our fair value estimate on MIT from S$1.43 to S$1.48. Maintain HOLD, as valuations appear fair, in our view.
4QFY15 results met our expectations
Mapletree Industrial Trust (MIT) reported a decent set of 4QFY15 results which was in-line with our expectations. Gross revenue and DPU both grew 5.6% YoY to S$79.4m and 2.65 S cents, respectively. This was driven by higher rental rates and occupancies recorded for its Hi-Tech Buildings, Business Park Buildings and Light Industrial Buildings, coupled with contribution from an acquisition made in May 2014. For FY15, MIT’s gross revenue rose 4.9% to S$313.9m and in-line with our projection of S$311.4m. DPU of 10.43 S cents represented growth of 5.1% and was 1.9% ahead of our forecast.
Positive rental reversions, but likely to moderate
During the quarter, MIT managed to secure positive rental reversions for its renewal leases for its Stack-Up/Ramp-Up Buildings (+3.1%), Flatted Factories (+5.7%) and Hi-Tech Buildings (+6.0%). No renewals were signed for its Business Park Buildings. Nevertheless, we note that new leases signed for its Hi-Tech Buildings, Business Park Buildings and Stack-Up/Ramp-Up Buildings actually came in below its passing rent. Although this possibly reflects the challenging leasing environment, we believe figures may also be skewed by factors such as size of floor space leased out and level of building which is leased out. Looking ahead, management acknowledged that its existing rents are close to market rents. Hence we expect its positive rental reversion trend to moderate further.
Maintain HOLD
MIT’s overall portfolio occupancy inched down from 90.8% (as at 31 Dec 2014) to 90.2% as at end FY15. Its balance sheet remains healthy, with an aggregate leverage ratio of 30.6%, while its interest rate hedge ratio now stands at 87%. We raise our DPU forecasts for FY16 and FY17 by 2% and 2.2%, respectively, after factoring in higher NPI margin and lower borrowing cost assumptions. Rolling forward our valuations, we bump up our fair value estimate on MIT from S$1.43 to S$1.48. Maintain HOLD, as valuations appear fair, in our view. MIT is trading at 1.21x FY16F P/B ratio, which is equal to its average forward P/B ratio of 1.2x since its IPO.
Mapletree Industrial Trust (MIT) reported a decent set of 4QFY15 results which was in-line with our expectations. Gross revenue and DPU both grew 5.6% YoY to S$79.4m and 2.65 S cents, respectively. This was driven by higher rental rates and occupancies recorded for its Hi-Tech Buildings, Business Park Buildings and Light Industrial Buildings, coupled with contribution from an acquisition made in May 2014. For FY15, MIT’s gross revenue rose 4.9% to S$313.9m and in-line with our projection of S$311.4m. DPU of 10.43 S cents represented growth of 5.1% and was 1.9% ahead of our forecast.
Positive rental reversions, but likely to moderate
During the quarter, MIT managed to secure positive rental reversions for its renewal leases for its Stack-Up/Ramp-Up Buildings (+3.1%), Flatted Factories (+5.7%) and Hi-Tech Buildings (+6.0%). No renewals were signed for its Business Park Buildings. Nevertheless, we note that new leases signed for its Hi-Tech Buildings, Business Park Buildings and Stack-Up/Ramp-Up Buildings actually came in below its passing rent. Although this possibly reflects the challenging leasing environment, we believe figures may also be skewed by factors such as size of floor space leased out and level of building which is leased out. Looking ahead, management acknowledged that its existing rents are close to market rents. Hence we expect its positive rental reversion trend to moderate further.
Maintain HOLD
MIT’s overall portfolio occupancy inched down from 90.8% (as at 31 Dec 2014) to 90.2% as at end FY15. Its balance sheet remains healthy, with an aggregate leverage ratio of 30.6%, while its interest rate hedge ratio now stands at 87%. We raise our DPU forecasts for FY16 and FY17 by 2% and 2.2%, respectively, after factoring in higher NPI margin and lower borrowing cost assumptions. Rolling forward our valuations, we bump up our fair value estimate on MIT from S$1.43 to S$1.48. Maintain HOLD, as valuations appear fair, in our view. MIT is trading at 1.21x FY16F P/B ratio, which is equal to its average forward P/B ratio of 1.2x since its IPO.
CapitaMall Trust
OCBC on 22 Apr 2015
CapitaMall Trust (CMT) reported its 1Q15 results which met our expectations. Gross revenue inched up 1.6% YoY to S$167.4m, while DPU grew at a stronger pace of 4.3% to 2.68 S cents. During the quarter, CMT managed to obtain positive rental reversions of 6.1%. Another encouraging sign came from the second consecutive quarter of YoY increase in both its shopper traffic and tenants’ sales psf. In terms of financial position and capital management, CMT’s aggregate leverage ratio remains healthy at 33.8%, while ~98.3% of its total debt are on a fixed rate basis or have been hedged. Given this set of in-line results, we are keeping our forecasts intact. Reiterate our HOLD rating and S$2.21 fair value estimate on CMT. The stock is currently trading at FY15F P/B ratio of 1.23x and distribution yield of 5.0%, which do not appear compelling, in our view.
1Q15 results within our expectations
CapitaMall Trust (CMT) reported its 1Q15 results which met our expectations. Gross revenue inched up 1.6% YoY to S$167.4m, while DPU grew at a stronger pace of 4.3% to 2.68 S cents. This constituted 24.5% and 24.1% of our FY15 projections, respectively. About S$8m, or 0.23 S cents of CMT’s taxable income available for distribution to unitholders, was retained for future distributions in FY15 (likely to be in 2H15). If we include this amount, CMT’s DPU would have formed 26.2% of our FY15 projection.
Operational trends showcase resiliency
During the quarter, CMT managed to obtain positive rental reversions of 6.1%, similar to the whole of FY14. Besides JCube (-11%) and Raffles City Singapore (-0.7%), all other malls delivered higher rental uplifts as compared to the preceding rental rates. Another encouraging sign came from the increase in both shopper traffic and tenants’ sales psf of 4.7% and 2.5% YoY, respectively. This was the second consecutive quarter of YoY growth achieved by CMT’s malls despite headwinds facing the retail sector in Singapore. As at 31 Mar 2015, CMT’s portfolio occupancy stood at 97.2%, slightly lower than the 98.8% clocked in as at end-2014, which we believe was partly due to AEI works at Bukit Panjang Plaza and Clarke Quay.
Retain our HOLD rating
In terms of financial position and capital management, CMT’s aggregate leverage ratio remains healthy at 33.8%, while ~98.3% of its total debt are on a fixed rate basis or have been hedged. Given this set of in-line results, we are keeping our forecasts intact. We are reiterating our HOLD rating and DDM-derived S$2.21 fair value estimate on CMT. The stock is currently trading at FY15F P/B ratio of 1.23x and distribution yield of 5.0%, which do not appear compelling, in our view. The former is approximately half a standard deviation above its 5-year forward mean, while the latter is one standard deviation below its 5-year forward average.
CapitaMall Trust (CMT) reported its 1Q15 results which met our expectations. Gross revenue inched up 1.6% YoY to S$167.4m, while DPU grew at a stronger pace of 4.3% to 2.68 S cents. This constituted 24.5% and 24.1% of our FY15 projections, respectively. About S$8m, or 0.23 S cents of CMT’s taxable income available for distribution to unitholders, was retained for future distributions in FY15 (likely to be in 2H15). If we include this amount, CMT’s DPU would have formed 26.2% of our FY15 projection.
Operational trends showcase resiliency
During the quarter, CMT managed to obtain positive rental reversions of 6.1%, similar to the whole of FY14. Besides JCube (-11%) and Raffles City Singapore (-0.7%), all other malls delivered higher rental uplifts as compared to the preceding rental rates. Another encouraging sign came from the increase in both shopper traffic and tenants’ sales psf of 4.7% and 2.5% YoY, respectively. This was the second consecutive quarter of YoY growth achieved by CMT’s malls despite headwinds facing the retail sector in Singapore. As at 31 Mar 2015, CMT’s portfolio occupancy stood at 97.2%, slightly lower than the 98.8% clocked in as at end-2014, which we believe was partly due to AEI works at Bukit Panjang Plaza and Clarke Quay.
Retain our HOLD rating
In terms of financial position and capital management, CMT’s aggregate leverage ratio remains healthy at 33.8%, while ~98.3% of its total debt are on a fixed rate basis or have been hedged. Given this set of in-line results, we are keeping our forecasts intact. We are reiterating our HOLD rating and DDM-derived S$2.21 fair value estimate on CMT. The stock is currently trading at FY15F P/B ratio of 1.23x and distribution yield of 5.0%, which do not appear compelling, in our view. The former is approximately half a standard deviation above its 5-year forward mean, while the latter is one standard deviation below its 5-year forward average.
Wednesday, 22 April 2015
Midas Holdings
Kim Eng on 22 Apr 2015
Following the Chinese government's "One Belt, One Road" initiative and the merger of CNR/CSR, A-share and HK-listed railway companies have been re-rated dramatically. CSR’s and CNR’s A shares have catapulted 759/716% respectively in the past 12 months. The contagion has spread to CSR’s/CNR’s suppliers in the market’s search for proxies. Nanshan Aluminum (600219 CH), one of CSR’s key suppliers, has rallied 142% in the same period. Midas, however, has fallen behind, trading at huge discounts to peers.
… unjustified
We believe investors’ misgivings about potential market-share losses and margin squeeze after the CSR/CNR merger are unwarranted. This is because: 1) the entire industry is in good shape; 2) we believe Midas’s ability to bag contracts from its longterm customers is uncompromised; and 3) it should be able to protect its margins as aluminium alloy extrusion profile products make up only 3% of a train body’s value. Midas has gained 32% in the past month but is still trading at 0.7x FY15 P/BV. Reiterate BUY with catalysts expected from contract wins. We believe it provides cheaper exposure to China’s rail sector, with downside limited by its 0.7x FY15 P/BV. Our TP is set at conservative 1x FY15 P/BV.
- Huge discounts to A-share & HK-listed peers unjustified.
- Cheaper exposure to China’s rail sector. HSR orders could bump up utilisation to 75% from 70%, with good operating leverage.
- Reiterate BUY with SGD0.50 TP still at 1x FY15 P/BV. Catalysts from stronger contract momentum.
Following the Chinese government's "One Belt, One Road" initiative and the merger of CNR/CSR, A-share and HK-listed railway companies have been re-rated dramatically. CSR’s and CNR’s A shares have catapulted 759/716% respectively in the past 12 months. The contagion has spread to CSR’s/CNR’s suppliers in the market’s search for proxies. Nanshan Aluminum (600219 CH), one of CSR’s key suppliers, has rallied 142% in the same period. Midas, however, has fallen behind, trading at huge discounts to peers.
… unjustified
We believe investors’ misgivings about potential market-share losses and margin squeeze after the CSR/CNR merger are unwarranted. This is because: 1) the entire industry is in good shape; 2) we believe Midas’s ability to bag contracts from its longterm customers is uncompromised; and 3) it should be able to protect its margins as aluminium alloy extrusion profile products make up only 3% of a train body’s value. Midas has gained 32% in the past month but is still trading at 0.7x FY15 P/BV. Reiterate BUY with catalysts expected from contract wins. We believe it provides cheaper exposure to China’s rail sector, with downside limited by its 0.7x FY15 P/BV. Our TP is set at conservative 1x FY15 P/BV.
Mapletree Logistics Trust
OCBC on 21 Apr 2015
Mapletree Logistics Trust (MLT) reported a soft set of 4QFY15 results, as DPU slipped 2.1% YoY to 1.85 S cents despite a 5.7% growth in revenue to S$84.7m. This was within our expectations. MLT’s operational performance was affected by downtime caused by the conversion of several of its Singapore properties from single-user assets to multi-tenanted buildings during FY15. This had a negative impact on its occupancy rate and net property income margin. Nevertheless, on a positive note, only its Singapore assets registered a decline in occupancy rates for FY15, while overall average rental reversions of 8.0% were achieved. Management has also hedged 80% of its total debt and estimated income stream for FY16. We trim our FY16 and FY17 DPU forecasts by 2%, but as we roll forward our valuations, our DDM-derived fair value estimate inches up slightly from S$1.12 to S$1.14. Maintain HOLD, given the lack of near-term catalysts.
4QFY15 results within expectations
Mapletree Logistics Trust (MLT) reported a soft set of 4QFY15 results, as DPU slipped 2.1% YoY to 1.85 S cents despite a 5.7% growth in revenue to S$84.7m. This was attributed largely to higher property expenses (+21.3% YoY) and borrowing costs (+22.6%). For FY15, gross revenue rose 6.2% YoY to S$330.1m while DPU increased slightly by 2.0% to 7.5 S cents. This was within our expectations as gross revenue and DPU formed 99.9% and 98.6% of our full-year forecasts, respectively.
Operations impacted by conversion of leases in Singapore
MLT’s operational performance was affected by downtime at several of its Singapore properties which underwent conversion from single-user assets (SUAs) to multi-tenanted buildings (MTBs) during FY15. This had a negative impact on its occupancy rate and net property income (NPI) margin, which eased 1.6 ppt and 2.1 ppt to 96.7% and 84%, respectively. Nevertheless, on a positive note, only its Singapore assets registered a decline in occupancy rates for FY15, while overall average rental reversions of 8.0% were achieved. Management has also mitigated its financial risks, as it has hedged 80% of its total debt into fixed rates. 80% of its income stream for FY16 have also been hedged into or derived in SGD.
Reiterate HOLD
Looking ahead, ~24% of MLT’s leases (by NLA) are expiring in FY16, of which 10% are leases for SUAs and 14% are leases for MTBs. As most of the SUAs in Singapore are expected to be converted to MTBs, we continue to see some pressure on MLT’s occupancy rate and margins. We trim our FY16 and FY17 DPU forecasts by 2%, but as we roll forward our valuations, our DDM-derived fair value estimate inches up slightly from S$1.12 to S$1.14. Maintain HOLD, given the lack of near-term catalysts. The stock is, however, trading at a decent FY16F distribution yield of 6.1%.
Mapletree Logistics Trust (MLT) reported a soft set of 4QFY15 results, as DPU slipped 2.1% YoY to 1.85 S cents despite a 5.7% growth in revenue to S$84.7m. This was attributed largely to higher property expenses (+21.3% YoY) and borrowing costs (+22.6%). For FY15, gross revenue rose 6.2% YoY to S$330.1m while DPU increased slightly by 2.0% to 7.5 S cents. This was within our expectations as gross revenue and DPU formed 99.9% and 98.6% of our full-year forecasts, respectively.
Operations impacted by conversion of leases in Singapore
MLT’s operational performance was affected by downtime at several of its Singapore properties which underwent conversion from single-user assets (SUAs) to multi-tenanted buildings (MTBs) during FY15. This had a negative impact on its occupancy rate and net property income (NPI) margin, which eased 1.6 ppt and 2.1 ppt to 96.7% and 84%, respectively. Nevertheless, on a positive note, only its Singapore assets registered a decline in occupancy rates for FY15, while overall average rental reversions of 8.0% were achieved. Management has also mitigated its financial risks, as it has hedged 80% of its total debt into fixed rates. 80% of its income stream for FY16 have also been hedged into or derived in SGD.
Reiterate HOLD
Looking ahead, ~24% of MLT’s leases (by NLA) are expiring in FY16, of which 10% are leases for SUAs and 14% are leases for MTBs. As most of the SUAs in Singapore are expected to be converted to MTBs, we continue to see some pressure on MLT’s occupancy rate and margins. We trim our FY16 and FY17 DPU forecasts by 2%, but as we roll forward our valuations, our DDM-derived fair value estimate inches up slightly from S$1.12 to S$1.14. Maintain HOLD, given the lack of near-term catalysts. The stock is, however, trading at a decent FY16F distribution yield of 6.1%.
Tuesday, 21 April 2015
Starhill Global REIT
Kim Eng on 21 Apr 2015
SGREIT has proposed to acquire Myer Centre Adelaide for AUD288m or SGD302m in cash. Deal closure is expected before end-Jun 2015. Myer Centre is in Adelaide’s retail CBD core, and has the only retail pedestrian stretch in the city. Completed in 1991, it is the city’s largest shopping centre. It comprises a retail centre with 620k sf of retail space, three office buildings occupying 98k sf and four basements with 467 carpark lots. Retail occupancy is 95%, excluding two vacant floors. Office occupancy is 93%. NPI of SGD19.95m implies NPI yields of 6.6%. FY14 proforma DPU would have been 5.19 SGD cts instead of 5.05 cts. There is upside from rental increases as most leases have embedded annual rent increases: 5% or CPI for retail, 3.5% for offices. In addition, two floors of its retail centre with 114k sf NLA are vacant and can be activated in the future. The acquisition will be funded with internal capital and debt. Aggregate leverage will climb from 29% to 35%.
Positive; Catalysts intact
We are positive on the acquisition. Transacted yield of 6.6% is attractive vs SGREIT’s 5.9%. Myer Centre also has strong growth prospects from its un-activated space and high embedded rental escalations of 3.5-5% pa vs Singapore’s more typical 2%. SGREIT remains our top buy among retail SREITs as 52% of its NPI comes from Orchard Road malls where supply is tight.
- Myer Centre offers attractive proforma historical property yields of 6.6%. Could add 2.8% to DPU.
- Purchase price of AUD288m below replacement cost, with potential upside from asset enhancement.
- We are positive on the acquisition. Top BUY among retail SREITs. DDM TP still at SGD0.93. Catalysts from positive rental reversions.
SGREIT has proposed to acquire Myer Centre Adelaide for AUD288m or SGD302m in cash. Deal closure is expected before end-Jun 2015. Myer Centre is in Adelaide’s retail CBD core, and has the only retail pedestrian stretch in the city. Completed in 1991, it is the city’s largest shopping centre. It comprises a retail centre with 620k sf of retail space, three office buildings occupying 98k sf and four basements with 467 carpark lots. Retail occupancy is 95%, excluding two vacant floors. Office occupancy is 93%. NPI of SGD19.95m implies NPI yields of 6.6%. FY14 proforma DPU would have been 5.19 SGD cts instead of 5.05 cts. There is upside from rental increases as most leases have embedded annual rent increases: 5% or CPI for retail, 3.5% for offices. In addition, two floors of its retail centre with 114k sf NLA are vacant and can be activated in the future. The acquisition will be funded with internal capital and debt. Aggregate leverage will climb from 29% to 35%.
Positive; Catalysts intact
We are positive on the acquisition. Transacted yield of 6.6% is attractive vs SGREIT’s 5.9%. Myer Centre also has strong growth prospects from its un-activated space and high embedded rental escalations of 3.5-5% pa vs Singapore’s more typical 2%. SGREIT remains our top buy among retail SREITs as 52% of its NPI comes from Orchard Road malls where supply is tight.
CapitaMall Trust
Kim Eng on 21 Apr 2015
1Q DPU was in line, at 25% of our FY15 forecast. Revenue was flat at SGD167m, up 1% on a same-mall basis and 1.6% YoY. Property expenses moderated from its seasonal marketing push at year-end. They were down 16.2% QoQ and 1.6% YoY. Net property income rose 11.1% QoQ and 3.0% YoY to SGD117.7m. DPU was 2.68 SGD cts (-6.3% QoQ, +4.3% YoY).
Still wary of competition
We maintain that six of its 16 malls will soon face stiff competition. About 566k sf of new retail space from Capitol, Marina Square AEI, South Beach and Suntec AEI is bound to give Raffles City tenants some bargaining power, we reckon. Funan’s foot traffic could also be further diverted as the property is not integrated with its surrounding new developments. In Jurong, IMM and JCube are both not linked to the nearest MRT station or Jurong’s new hospital. Newer competing malls, Westgate-Jem-Big Box, are. In 1Q16, Hillion Mall will emerge in-between Bukit Panjang Plaza and the LRT. Meanwhile, retail sales remain tepid owing to a lacklustre economy and foreign-worker.
Flat DPUs;
SELL DPU is expected to decline 1.2% this year as we factor in the competition, weak retail environment and rising interest rates. DPU yields and P/BV are at -1SD and +1SD of their 12-year means respectively, which could be hard to maintain if DPU disappoints. SELL with a DDM TP of SGD1.87 (CoE 7.7%, LTG 2%).
- 1Q15 in line. Still wary of competition for six of its 16 malls.
- DPUs flat for two years as we factor in competition, weak retail sales & rising interest rates.
- SELL with unchanged DDM TP of SGD1.87. De-rating catalysts from potential DPU misses.
1Q DPU was in line, at 25% of our FY15 forecast. Revenue was flat at SGD167m, up 1% on a same-mall basis and 1.6% YoY. Property expenses moderated from its seasonal marketing push at year-end. They were down 16.2% QoQ and 1.6% YoY. Net property income rose 11.1% QoQ and 3.0% YoY to SGD117.7m. DPU was 2.68 SGD cts (-6.3% QoQ, +4.3% YoY).
Still wary of competition
We maintain that six of its 16 malls will soon face stiff competition. About 566k sf of new retail space from Capitol, Marina Square AEI, South Beach and Suntec AEI is bound to give Raffles City tenants some bargaining power, we reckon. Funan’s foot traffic could also be further diverted as the property is not integrated with its surrounding new developments. In Jurong, IMM and JCube are both not linked to the nearest MRT station or Jurong’s new hospital. Newer competing malls, Westgate-Jem-Big Box, are. In 1Q16, Hillion Mall will emerge in-between Bukit Panjang Plaza and the LRT. Meanwhile, retail sales remain tepid owing to a lacklustre economy and foreign-worker.
Flat DPUs;
SELL DPU is expected to decline 1.2% this year as we factor in the competition, weak retail environment and rising interest rates. DPU yields and P/BV are at -1SD and +1SD of their 12-year means respectively, which could be hard to maintain if DPU disappoints. SELL with a DDM TP of SGD1.87 (CoE 7.7%, LTG 2%).
SMRT Corporation
UOBKayhian on 21 Apr 2015
MRT SP/HOLD/S$1.66/Target: S$1.73
FY15F PE (x): 26.0
FY16F PE (x): 20.1
We analyse the potential impact should SMRT-OMGTEL (OMG) step forward as Singapore’s fourth mobile operator. To re-cap, SMRT and OMG have agreed to work exclusively in a bid for Singapore's fourth wireless telecommunications carrier licence. SMRT carries the option to invest up to S$34.5m via a subscription for shares in OMG. The exercise of the option will be at SMRT's election, and subject to OMG obtaining the telco licence, among others. Not a massive initial capital outlay. At S$34.5m, we think SMRT will likely not be a major shareholder of OMG. SMRT is expected to have at least an equity stake (>20%) for any earnings and equity participation to be meaningful. Should SMRT decide to take on more than 50% ownership (which is unlikely, in our view) or has substantial influence on OMG, the group will have to consolidate any additional debt on its balance sheet, which will further increase its gearing. The group’s net gearing has increased from 60% as at Mar14 to 79% as at Dec14. Maintain HOLD and DCF-based target price of $1.73, implying FY16 dividend yield of 2.7% and PE of 20.1x (WACC: 7.9%, terminal growth: 3.0%). We expect SMRT to rerate should there be any further details offering clarity on the railway restructuring. Entry price is S$1.56. However, we continue to prefer ComfortDelGro for its overseas growth potential, geographical and earnings diversification.
MRT SP/HOLD/S$1.66/Target: S$1.73
FY15F PE (x): 26.0
FY16F PE (x): 20.1
We analyse the potential impact should SMRT-OMGTEL (OMG) step forward as Singapore’s fourth mobile operator. To re-cap, SMRT and OMG have agreed to work exclusively in a bid for Singapore's fourth wireless telecommunications carrier licence. SMRT carries the option to invest up to S$34.5m via a subscription for shares in OMG. The exercise of the option will be at SMRT's election, and subject to OMG obtaining the telco licence, among others. Not a massive initial capital outlay. At S$34.5m, we think SMRT will likely not be a major shareholder of OMG. SMRT is expected to have at least an equity stake (>20%) for any earnings and equity participation to be meaningful. Should SMRT decide to take on more than 50% ownership (which is unlikely, in our view) or has substantial influence on OMG, the group will have to consolidate any additional debt on its balance sheet, which will further increase its gearing. The group’s net gearing has increased from 60% as at Mar14 to 79% as at Dec14. Maintain HOLD and DCF-based target price of $1.73, implying FY16 dividend yield of 2.7% and PE of 20.1x (WACC: 7.9%, terminal growth: 3.0%). We expect SMRT to rerate should there be any further details offering clarity on the railway restructuring. Entry price is S$1.56. However, we continue to prefer ComfortDelGro for its overseas growth potential, geographical and earnings diversification.
United Envirotech
OCBC on 20 Apr 2015
The unconditional voluntary offer by CITIC for United Envirotech Ltd’s (UEL) shares at S$1.65/each has closed on 16 Apr, with the offeror CKM (Cayman) company now holding 85.6% of the total number of issued UEL shares. As such, UEL would not need to make any new share placement for the purpose of restoring the free float above 10% to keep the company listed on the SGX. As before, we view the move as positive as CITIC will give UEL access to cheaper funding, help open more doors and expand its reach into other regions of China. While we are keeping our estimates unchanged ahead of its 4QFY15 results due out sometime in May, we raise our valuation peg to 28x FY16F EPS; this in turn raises our fair value from S$1.65 to S$1.70. Maintain HOLD rating for now until we see more clarity on the level of cooperation between CITIC and UEL.
CITIC offer closes with 86% acceptance
The unconditional voluntary offer by CITIC for United Envirotech Ltd’s (UEL) shares at S$1.65/each has closed on 16 Apr, with the offeror CKM (Cayman) company now holding 85.6% of the total number of issued UEL shares. As such, UEL would not need to make any new share placement for the purpose of restoring the free float above 10% to keep the company listed on the SGX.
CITIC partnership is long-term positive
As before, we view the move as positive as CITIC will give UEL access to cheaper funding, help open more doors and expand its reach into other regions of China. CITIC also intends to subscribe for another 30m to 50m new UEL shares at S$1.65 each. We note that the fresh cash injection of nearly S$50m (from 30m new shares) could help fund another S$165m worth of new projects, assuming the usual 30% equity financing model. This would definitely come in very useful as UEL had recently entered into an agreement to acquire Bishui Lantian Co Ltd (BSLT) for RMB500m (~S$111.1m), or 23x historical PER. BSLT currently owns a wastewater treatment plant with 200k m3/day capacity and a recycling plant with 20k m3/day capacity.
Outlook for China remains positive
We note that the State Council has released the “The Action Plan for Water Pollution Prevention and Control”, with 238 concrete measures to reduce pollutants, improve drinking water and promote water conservation. While details are still scant on how the regional governments will proceed to implement these measures, UEL’s integrated solutions model puts it in a good position to benefit from higher discharge standards and need for more water recycling.
Maintain HOLD with new S$1.70 fair value
While we are keeping our estimates unchanged ahead of its 4QFY15 results due out sometime in May, we raise our valuation peg to 28x FY16F EPS; this in turn raises our fair value from S$1.65 to S$1.70. Maintain HOLD rating for now until we see more clarity on the level of cooperation between CITIC and UEL.
The unconditional voluntary offer by CITIC for United Envirotech Ltd’s (UEL) shares at S$1.65/each has closed on 16 Apr, with the offeror CKM (Cayman) company now holding 85.6% of the total number of issued UEL shares. As such, UEL would not need to make any new share placement for the purpose of restoring the free float above 10% to keep the company listed on the SGX.
CITIC partnership is long-term positive
As before, we view the move as positive as CITIC will give UEL access to cheaper funding, help open more doors and expand its reach into other regions of China. CITIC also intends to subscribe for another 30m to 50m new UEL shares at S$1.65 each. We note that the fresh cash injection of nearly S$50m (from 30m new shares) could help fund another S$165m worth of new projects, assuming the usual 30% equity financing model. This would definitely come in very useful as UEL had recently entered into an agreement to acquire Bishui Lantian Co Ltd (BSLT) for RMB500m (~S$111.1m), or 23x historical PER. BSLT currently owns a wastewater treatment plant with 200k m3/day capacity and a recycling plant with 20k m3/day capacity.
Outlook for China remains positive
We note that the State Council has released the “The Action Plan for Water Pollution Prevention and Control”, with 238 concrete measures to reduce pollutants, improve drinking water and promote water conservation. While details are still scant on how the regional governments will proceed to implement these measures, UEL’s integrated solutions model puts it in a good position to benefit from higher discharge standards and need for more water recycling.
Maintain HOLD with new S$1.70 fair value
While we are keeping our estimates unchanged ahead of its 4QFY15 results due out sometime in May, we raise our valuation peg to 28x FY16F EPS; this in turn raises our fair value from S$1.65 to S$1.70. Maintain HOLD rating for now until we see more clarity on the level of cooperation between CITIC and UEL.
Keppel Corporation
OCBC on 17 Apr 2015
Keppel Corporation reported a 6.1% YoY fall in revenue to S$2.8b but a 6.4% increase in net profit to S$360.2m in 1Q15, such that net profit accounted for 22% of our full year figure, below our expectations. Eight rigs have been deferred due to customer requests, in which Keppel will obtain some compensation. Meanwhile, the Brazil situation remains fluid as Sete Brasil seeks a solution to its financial woes, and payments remain suspended. To date, Keppel’s new order wins totaled only about S$500m, and we lower our new order win assumptions. At the same time, we also note the recent recovery in valuations for oil and gas stocks, and increase our P/E for the O&M segment from 12x to 13x, resulting in a rise in our fair value estimate from S$8.65 to S$9.22. Maintain HOLD.
So-so 1Q15 results
Keppel Corporation reported a 6.1% YoY fall in revenue to S$2.8b but a 6.4% increase in net profit to S$360.2m in 1Q15, such that net profit accounted for 22% of our full year figure, below our expectations. Operating margin for the O&M division was also lower at 12.0% in the quarter, vs. 14.6% a year ago and 13.2% in 4Q14. Meanwhile, eight rigs have been deferred (five from Transocean and three from Fecon) due to customer requests, but Keppel will obtain some compensation for fulfilling the requests.
Sete Brasil in 90-day moratorium
In Brazil, lenders and shareholders have declared a 90-day moratorium to seek a solution for Sete Brasil’s financial woes. A favoured solution would be to reduce the 29-rig construction project to just 13 units, focusing on the two most experienced and financially strong yards, Keppel and SMM. We think this is likely to be the most favoured solution, but refrain from being too optimistic before the final announcement by Sete Brasil, who also has to resume its milestone payments.
S$500m new order wins so far
To date, new order wins totaled only about S$500m, vs. S$5.5b for the whole of FY14 and S$7b for FY13. As such, we are lowering our FY15F and FY16F new order win forecasts from S$4.5b and S$3.5b to S$2b and S$3b, respectively. Our S$2b forecast for this year could be partially fulfilled by new wins from Mexico, as it was previously announced that the first phase of the new yard that is being built for PEMEX will support the construction of six rigs.
Maintain HOLD
The group’s net gearing stood at 0.37x, and is in a good position with its S$11.3b net order book (as at end Mar 2015,), which will keep its yards busy for the next two years. Though we lower our new order win assumptions, we also note the recent recovery in valuations for oil and gas stocks, and increase our P/E for the O&M segment from 12x to 13x, resulting in a rise in our fair value estimate from S$8.65 to S$9.22. Maintain HOLD.
Keppel Corporation reported a 6.1% YoY fall in revenue to S$2.8b but a 6.4% increase in net profit to S$360.2m in 1Q15, such that net profit accounted for 22% of our full year figure, below our expectations. Operating margin for the O&M division was also lower at 12.0% in the quarter, vs. 14.6% a year ago and 13.2% in 4Q14. Meanwhile, eight rigs have been deferred (five from Transocean and three from Fecon) due to customer requests, but Keppel will obtain some compensation for fulfilling the requests.
Sete Brasil in 90-day moratorium
In Brazil, lenders and shareholders have declared a 90-day moratorium to seek a solution for Sete Brasil’s financial woes. A favoured solution would be to reduce the 29-rig construction project to just 13 units, focusing on the two most experienced and financially strong yards, Keppel and SMM. We think this is likely to be the most favoured solution, but refrain from being too optimistic before the final announcement by Sete Brasil, who also has to resume its milestone payments.
S$500m new order wins so far
To date, new order wins totaled only about S$500m, vs. S$5.5b for the whole of FY14 and S$7b for FY13. As such, we are lowering our FY15F and FY16F new order win forecasts from S$4.5b and S$3.5b to S$2b and S$3b, respectively. Our S$2b forecast for this year could be partially fulfilled by new wins from Mexico, as it was previously announced that the first phase of the new yard that is being built for PEMEX will support the construction of six rigs.
Maintain HOLD
The group’s net gearing stood at 0.37x, and is in a good position with its S$11.3b net order book (as at end Mar 2015,), which will keep its yards busy for the next two years. Though we lower our new order win assumptions, we also note the recent recovery in valuations for oil and gas stocks, and increase our P/E for the O&M segment from 12x to 13x, resulting in a rise in our fair value estimate from S$8.65 to S$9.22. Maintain HOLD.
Monday, 20 April 2015
Singapore Banks
Kim Eng on 20 Apr 2015
Some clients are apprehensive about the recent interest-rate spike, fearing that slowing loan growth and weaker credit quality could overwhelm fatter NIMs. While recent rate hikes could indeed weigh on loan demand, we estimate the incremental net interest income from a 50bp rate increase at 3-4x the potential revenue loss from a 1ppt shortfall in loan growth. And while banks may cut their loan-growth guidance during this results season, we expect 3ppt cuts to 4-5%, at most. Moreover, our loan-growth projections are conservative, at 7% for the year vs +9.5% last year. The Street is also not that aggressive, anticipating around 7-8%.
Asset quality shielded
Higher rates typically impair repayment ability. But we expect asset quality to be shielded by a string of macro-prudential and pre-emptive measures rolled out since 2009. Stress could start to emerge if the 3M SIBOR hits 3.5% in one fell swoop from 1%. In such an event, SME loans are most vulnerable, given their smaller balance sheets. But the saving grace is banks’ proportions of unsecured SME loans have shrunk in recent years. We also do not foresee any further rapid ascent to 3.5% before the Fed makes its next interest-rate move.
Maintain OVERWEIGHT
DBS remains our top pick. We believe it is best positioned to take advantage of rising interest rates. Our second choice is UOB.
- Incipient unease over credit risks & slower loan growth from rising SIBOR/SOR unwarranted.
- Fatter NIMs should plug gap. Safety nets to protect loan quality.
- Maintain OVERWEIGHT with catalysts from higher interest rates. DBS our top pick, followed by UOB.
Some clients are apprehensive about the recent interest-rate spike, fearing that slowing loan growth and weaker credit quality could overwhelm fatter NIMs. While recent rate hikes could indeed weigh on loan demand, we estimate the incremental net interest income from a 50bp rate increase at 3-4x the potential revenue loss from a 1ppt shortfall in loan growth. And while banks may cut their loan-growth guidance during this results season, we expect 3ppt cuts to 4-5%, at most. Moreover, our loan-growth projections are conservative, at 7% for the year vs +9.5% last year. The Street is also not that aggressive, anticipating around 7-8%.
Asset quality shielded
Higher rates typically impair repayment ability. But we expect asset quality to be shielded by a string of macro-prudential and pre-emptive measures rolled out since 2009. Stress could start to emerge if the 3M SIBOR hits 3.5% in one fell swoop from 1%. In such an event, SME loans are most vulnerable, given their smaller balance sheets. But the saving grace is banks’ proportions of unsecured SME loans have shrunk in recent years. We also do not foresee any further rapid ascent to 3.5% before the Fed makes its next interest-rate move.
Maintain OVERWEIGHT
DBS remains our top pick. We believe it is best positioned to take advantage of rising interest rates. Our second choice is UOB.
Tat Hong
OCBC on 20 Apr 2015
Tat Hong issued a profit guidance statement last Friday evening as the group expects to report a loss for 4QFY15, attributed to weak performance of its Australia wholly-owned subsidiary amid challenging business conditions. Hence, the group is also expected to recognise significant charges for the impairment of goodwill and assets. With that said, the group expects to remain profitable for FY15, citing a stable underlying performance. We note that performance in Australia had remained a concern over the past quarters. Given the muted outlook for its key market, we reduce our fair value from S$0.75 to S$0.63. However, as its share price has fallen by ~18% over the past five months, we think that the negatives may have been priced in. Thus, we maintain our HOLD rating, while we wait for further details when results are released on or around 29 May.
Expects net loss for 4Q; Still profitable for full-year
Tat Hong issued a profit guidance statement last Friday evening as the group expects to report a loss for 4QFY15, attributed to weak performance of its Australia wholly-owned subsidiary amid challenging business conditions due to the slowdown in Australia’s economy and mining sector. Hence, the group is also expected to recognise significant charges for the impairment of goodwill and assets, which is non-cash in nature. With that said, the group expects to remain profitable for FY15, citing a stable underlying performance.
Picture to possibly stay the same
With operations in Australia contributing to about 44% of the group’s total revenue, we noted in our last report that its performance there remained a concern. Meanwhile, we did see higher revenue contribution from SEA countries and Hong Kong, and stable crane rental revenue was achieved in Hong Kong and Thailand. Segment wise, topline growth could continue to be supported by its Tower Crane rental segment in China while the other divisions (Crane rental, Distribution, General Equipment rental) may stay largely unexciting.
Plans to improve operating efficiency
In the past month, Tat Hong had announced the disposal of its properties in Singapore and Malaysia, which would give gains of S$4.1m and RM11.5m (~S$4.2m), respectively. With the aim to improve operating efficiency, the disposals are a result of plans to consolidate its Singapore operations in the Tuas area as well as a relocation of operations to larger premises in Johor, Malaysia.
Maintain HOLD
Due to the muted outlook for its key market, a net loss in 4QFY15 and lower growth in FY16, we reduce our fair value from S$0.75 to S$0.63. However, as its share price has fallen by ~18% over the past five months, we think that the negatives may have been priced in. Thus, we maintain our HOLD rating, while we wait for further details when results are released on or around 29 May.
Tat Hong issued a profit guidance statement last Friday evening as the group expects to report a loss for 4QFY15, attributed to weak performance of its Australia wholly-owned subsidiary amid challenging business conditions due to the slowdown in Australia’s economy and mining sector. Hence, the group is also expected to recognise significant charges for the impairment of goodwill and assets, which is non-cash in nature. With that said, the group expects to remain profitable for FY15, citing a stable underlying performance.
Picture to possibly stay the same
With operations in Australia contributing to about 44% of the group’s total revenue, we noted in our last report that its performance there remained a concern. Meanwhile, we did see higher revenue contribution from SEA countries and Hong Kong, and stable crane rental revenue was achieved in Hong Kong and Thailand. Segment wise, topline growth could continue to be supported by its Tower Crane rental segment in China while the other divisions (Crane rental, Distribution, General Equipment rental) may stay largely unexciting.
Plans to improve operating efficiency
In the past month, Tat Hong had announced the disposal of its properties in Singapore and Malaysia, which would give gains of S$4.1m and RM11.5m (~S$4.2m), respectively. With the aim to improve operating efficiency, the disposals are a result of plans to consolidate its Singapore operations in the Tuas area as well as a relocation of operations to larger premises in Johor, Malaysia.
Maintain HOLD
Due to the muted outlook for its key market, a net loss in 4QFY15 and lower growth in FY16, we reduce our fair value from S$0.75 to S$0.63. However, as its share price has fallen by ~18% over the past five months, we think that the negatives may have been priced in. Thus, we maintain our HOLD rating, while we wait for further details when results are released on or around 29 May.
Tee International
OCBC on 16 Apr 2015
Tee International (TEE) reported that its 3QFY15 PATMI dipped 76.5% YoY to S$0.13m mostly due to weaker gross margins, and higher admin and finance expenses. 9MFY15 PATMI cumulates to S$2.9m, down 5.6% YoY, which we deem to be below expectations. We revise our FY15 forecast downwards to S$6.0m and introduce FY16 estimates of S$8.8m. Looking ahead, the group expects the competitive operating environment to stay challenging and will take a prudent stance in evaluating growth prospects in Singapore and the region. That said, while management are cautious on the muted property market in Singapore and Malaysia, they are confident of the long term prospects of the real estate market in Thailand, New Zealand and Australia; and the group’s real estate subsidiary, Tee Land, has recently acquired another hotel in Sydney, Australia, and a property in Christchurch, New Zealand. We have a HOLD rating on TEE with a fair value estimate of S$0.24.
3QFY15 PATMI down 77% YoY to S$0.13m
Tee International (TEE) reported that its 3QFY15 PATMI dipped 76.5% YoY to S$0.13m mostly due to weaker gross margins, and higher admin and finance expenses. In particular, we note that admin expenses increased 14.5% YoY (S$0.7m) given marketing costs incurred for a property development project in Malaysia by TEE Land. 9MFY15 PATMI cumulates to S$2.9m, down 5.6% YoY, which we deem to be below expectations. We revise our FY15 forecast downwards to S$6.0m and introduce FY16 estimates of S$8.8m. The group’s order book for the engineering segment now stands at S$410m, and major projects include Marina One, Tampines Hub and Changi Airport, as well as MDIS Educity@Iskandar, St Regis and The Parisian in Macao.
Expanding into the energy infrastructure space
TEE also recently expanded into the energy infrastructure space and, in Feb 2015, entered into a JV agreement to construct a 25 MW green-field power plant in Iligan, Philippines and a power sales agreement to supply power to a nearby cement plant and to the City of Iligan, Mindanao. The total off-take of the two power sales agreement will amount to 20 MW out of the total 25 MW capacity. We understand that the group is looking to further expand their energy portfolio in the Philippines.
Rated HOLD with S$0.24 FV estimate
Looking ahead, the group expects the competitive operating environment to stay challenging and will take a prudent stance in evaluating growth prospects in Singapore and the region. That said, while management are cautious on the muted property market in Singapore and Malaysia, it is confident of the long term prospects of the real estate market in Thailand, New Zealand and Australia; and the group’s real estate subsidiary, Tee Land, has recently acquired another hotel in Sydney, Australia, and a property in Christchurch, New Zealand. We have a HOLD rating on TEE with a fair value estimate of S$0.24.
Tee International (TEE) reported that its 3QFY15 PATMI dipped 76.5% YoY to S$0.13m mostly due to weaker gross margins, and higher admin and finance expenses. In particular, we note that admin expenses increased 14.5% YoY (S$0.7m) given marketing costs incurred for a property development project in Malaysia by TEE Land. 9MFY15 PATMI cumulates to S$2.9m, down 5.6% YoY, which we deem to be below expectations. We revise our FY15 forecast downwards to S$6.0m and introduce FY16 estimates of S$8.8m. The group’s order book for the engineering segment now stands at S$410m, and major projects include Marina One, Tampines Hub and Changi Airport, as well as MDIS Educity@Iskandar, St Regis and The Parisian in Macao.
Expanding into the energy infrastructure space
TEE also recently expanded into the energy infrastructure space and, in Feb 2015, entered into a JV agreement to construct a 25 MW green-field power plant in Iligan, Philippines and a power sales agreement to supply power to a nearby cement plant and to the City of Iligan, Mindanao. The total off-take of the two power sales agreement will amount to 20 MW out of the total 25 MW capacity. We understand that the group is looking to further expand their energy portfolio in the Philippines.
Rated HOLD with S$0.24 FV estimate
Looking ahead, the group expects the competitive operating environment to stay challenging and will take a prudent stance in evaluating growth prospects in Singapore and the region. That said, while management are cautious on the muted property market in Singapore and Malaysia, it is confident of the long term prospects of the real estate market in Thailand, New Zealand and Australia; and the group’s real estate subsidiary, Tee Land, has recently acquired another hotel in Sydney, Australia, and a property in Christchurch, New Zealand. We have a HOLD rating on TEE with a fair value estimate of S$0.24.
Friday, 17 April 2015
SPH
OCBC on 15 Apr 2015
SPH reported a 2QFY15 PATMI of S$69.6m, down 14.4% mostly due to the absence of divestment gains recognized in 2QFY14; but partially offset by higher income from investments, a stronger share of results of JV/associates and a higher operating profit of S$68.0m over 2QFY15 which increased 27.1% YoY. We judge these results to be broadly within expectations, and 1HFY15 revenues and operating profit now makes up 47.1% and 48.8% of our full year forecast, respectively. We like that management has successfully managed cost-side pressures over the quarter; and staff costs, material and production costs, and operating other expenses all similarly fell 6.3%, 17.0% and 21.6% YoY, respectively. An interim dividend of 7.0 S-cents per share was declared. Maintain HOLD with an unchanged fair value estimate of S$3.85.
2QFY15 results mostly in line
Singapore Press Holdings (SPH) reported a 2QFY15 PATMI of S$69.6m, down 14.4% mostly due to the absence of divestment gains recognized in 2QFY14; but partially offset by higher income from investments, a stronger share of results of JV/associates and a higher operating profit of S$68.0m over 2QFY15 which increased 27.1% YoY. Topline for the quarter dipped 3.0% YoY to S$270.3m mainly as media revenues continue to slip (down 7.1% to S$202.8m), with advertisement and circulation revenues both falling 8.0% and 7.7%, respectively. The impact of the weaker media numbers, however, was partially negated with contributions from the newly-opened Seletar Mall and revenues from the property segment increased 17.2% to S$60.6m. We judge these results to be broadly within expectations, and 1HFY15 revenues and operating profit now makes up 47.1% and 48.8% of our full year forecast, respectively. In addition, the board declared an interim dividend of 7.0 S-cents per share, which is similarly within expectations and unchanged from that in the same period last year.
Cost pressures were well managed
We like that SPH has successfully managed cost-side pressures over the quarter; and staff costs, material and production costs, and operating other expenses all similarly fell 6.3%, 17.0% and 21.6% YoY, respectively. The group’s staff headcount was kept mostly flat at 4,310 as at end 2QFY15 versus 4,316 at 2QFY14. Newsprint prices continued to inch down to S$573/MT versus S$586/MT in 4QFY14, and average monthly consumption also fell to 6,811 MT from 7,847 MT. While display and classified ad revenues in 2QFY15 fell 8.2% and 8.4% YoY, respectively, management indicated that they are seeing signs of the ad spend outlook stabilizing and that the Singapore Adex benchmark registered a YoY uptick in the month of Feb-15 after four consecutive declines. We opt to maintain our HOLD rating with an unchanged fair value estimate of S$3.85, but would keep a close eye on more visibility for a turnaround in the group’s core media business which could be a key positive catalyst ahead.
Singapore Press Holdings (SPH) reported a 2QFY15 PATMI of S$69.6m, down 14.4% mostly due to the absence of divestment gains recognized in 2QFY14; but partially offset by higher income from investments, a stronger share of results of JV/associates and a higher operating profit of S$68.0m over 2QFY15 which increased 27.1% YoY. Topline for the quarter dipped 3.0% YoY to S$270.3m mainly as media revenues continue to slip (down 7.1% to S$202.8m), with advertisement and circulation revenues both falling 8.0% and 7.7%, respectively. The impact of the weaker media numbers, however, was partially negated with contributions from the newly-opened Seletar Mall and revenues from the property segment increased 17.2% to S$60.6m. We judge these results to be broadly within expectations, and 1HFY15 revenues and operating profit now makes up 47.1% and 48.8% of our full year forecast, respectively. In addition, the board declared an interim dividend of 7.0 S-cents per share, which is similarly within expectations and unchanged from that in the same period last year.
Cost pressures were well managed
We like that SPH has successfully managed cost-side pressures over the quarter; and staff costs, material and production costs, and operating other expenses all similarly fell 6.3%, 17.0% and 21.6% YoY, respectively. The group’s staff headcount was kept mostly flat at 4,310 as at end 2QFY15 versus 4,316 at 2QFY14. Newsprint prices continued to inch down to S$573/MT versus S$586/MT in 4QFY14, and average monthly consumption also fell to 6,811 MT from 7,847 MT. While display and classified ad revenues in 2QFY15 fell 8.2% and 8.4% YoY, respectively, management indicated that they are seeing signs of the ad spend outlook stabilizing and that the Singapore Adex benchmark registered a YoY uptick in the month of Feb-15 after four consecutive declines. We opt to maintain our HOLD rating with an unchanged fair value estimate of S$3.85, but would keep a close eye on more visibility for a turnaround in the group’s core media business which could be a key positive catalyst ahead.
Soilbuild Business Space REIT
OCBC on 15 Apr 2015
Soilbuild Business Space REIT (Soilbuild REIT) reported its 1Q15 results which met our expectations. Gross revenue jumped 10.5% YoY to S$18.6m and DPU was up 4.5% to 1.633 S cents, underpinned by additional rental revenue from three new acquisitions in 2Q14 and 4Q14. Operationally, Soilbuild REIT maintained its portfolio occupancy rate of 100% (as at 31 Mar 2015), while positive rental reversions of 9.3% for lease renewals were achieved in 1Q15. Notwithstanding the healthy 100% tenant retention rate in 1Q15, management cautioned that this is unlikely to be sustained for the rest of the year due to macroeconomic headwinds and supply concerns. In terms of capital management, Soilbuild REIT has hedged 81.9% of its total debt, and its aggregate leverage stands at 38.5%. We maintain our BUY rating and S$0.93 fair value on Soilbuild REIT, as the stock still offers an attractive FY15F distribution yield of 7.7%.
1Q15 results within our expectations
Soilbuild Business Space REIT (Soilbuild REIT) reported its 1Q15 results which met our expectations. Gross revenue jumped 10.5% YoY to S$18.6m, underpinned by additional rental revenue from three new properties acquired in 2Q14 and 4Q14. This formed 24.8% of our FY15 forecast. DPU was up 4.5% YoY to 1.633 S cents and constituted 25.3% of our full-year estimate. Operationally, Soilbuild REIT maintained its portfolio occupancy rate of 100% (as at 31 Mar 2015), while positive rental reversions of 9.3% for lease renewals were achieved in 1Q15. Although 18.4% of Soilbuild REIT’s NLA is expiring in FY15, this is an improvement from the 29.7% figure at the start of the year, which reflects management’s proactive renegotiation efforts.
Industry headwinds may weigh on occupancy rate
Notwithstanding the healthy 100% tenant retention rate in 1Q15, management cautioned that this is unlikely to be sustained for the rest of the year. We believe this can be attributed largely to macroeconomic headwinds and increased competitive pressures from the large upcoming supply of factory space in Singapore. The bulk of Soilbuild REIT’s remaining lease expires in FY15 and comes from its West Park BizCentral and Tuas Connection properties.
Maintain BUY
In terms of capital management, Soilbuild REIT has hedged 81.9% of its total debt. Its average all-in interest cost stands at 3.28%, as at 31 Mar 2015, a slight uptick of 9 bps versus end-2014. Current aggregate leverage ratio has also increased from 35.4% (as at 31 Dec 2014) to 38.5%, as this includes the interest free loan from its sponsor and deferred payment in relation to the Solaris upfront land premium to be paid to JTC. On the acquisition front, management plans to complete the purchase of 72 Loyang Way by end 2Q15 (total acquisition cost of S$98.1m), and we believe this would be financed by both debt and equity. Pending the finalisation of the funding structure, we have not incorporated this acquisition in our model. Maintain BUY and S$0.93 fair value on Soilbuild REIT, as the stock still offers an attractive FY15F distribution yield of 7.7%.
Soilbuild Business Space REIT (Soilbuild REIT) reported its 1Q15 results which met our expectations. Gross revenue jumped 10.5% YoY to S$18.6m, underpinned by additional rental revenue from three new properties acquired in 2Q14 and 4Q14. This formed 24.8% of our FY15 forecast. DPU was up 4.5% YoY to 1.633 S cents and constituted 25.3% of our full-year estimate. Operationally, Soilbuild REIT maintained its portfolio occupancy rate of 100% (as at 31 Mar 2015), while positive rental reversions of 9.3% for lease renewals were achieved in 1Q15. Although 18.4% of Soilbuild REIT’s NLA is expiring in FY15, this is an improvement from the 29.7% figure at the start of the year, which reflects management’s proactive renegotiation efforts.
Industry headwinds may weigh on occupancy rate
Notwithstanding the healthy 100% tenant retention rate in 1Q15, management cautioned that this is unlikely to be sustained for the rest of the year. We believe this can be attributed largely to macroeconomic headwinds and increased competitive pressures from the large upcoming supply of factory space in Singapore. The bulk of Soilbuild REIT’s remaining lease expires in FY15 and comes from its West Park BizCentral and Tuas Connection properties.
Maintain BUY
In terms of capital management, Soilbuild REIT has hedged 81.9% of its total debt. Its average all-in interest cost stands at 3.28%, as at 31 Mar 2015, a slight uptick of 9 bps versus end-2014. Current aggregate leverage ratio has also increased from 35.4% (as at 31 Dec 2014) to 38.5%, as this includes the interest free loan from its sponsor and deferred payment in relation to the Solaris upfront land premium to be paid to JTC. On the acquisition front, management plans to complete the purchase of 72 Loyang Way by end 2Q15 (total acquisition cost of S$98.1m), and we believe this would be financed by both debt and equity. Pending the finalisation of the funding structure, we have not incorporated this acquisition in our model. Maintain BUY and S$0.93 fair value on Soilbuild REIT, as the stock still offers an attractive FY15F distribution yield of 7.7%.
First REIT
OCBC on 15 Apr 2015
First REIT (FREIT) posted its 1Q15 results which turned out to be in-line with our expectations. Gross revenue and DPU rose 10.1% and 3.5% YoY to S$24.7m and 2.06 S cents, respectively, driven by stable organic growth and a full-quarter of contribution from Siloam Sriwijaya which was acquired in Dec 2014. Meanwhile, Siloam International Hospitals, which is the operator of FREIT’s Indonesian hospitals, recently reported a robust set of FY14 results. Gross operating revenue increased by 33% to IDR3,341b, while EBITDA accelerated 56% to IDR466b. Looking ahead, we expect FREIT to maintain its core focus on the Indonesian healthcare market, given the favourable demand and supply dynamics, rising middle-class population and healthy pipeline of potential acquisition targets from Siloam International Hospitals. FREIT will also explore asset enhancement initiatives in Indonesia. Maintain BUY and S$1.50 fair value estimate on FREIT.
1Q15 results in-line with our expectations
First REIT (FREIT) posted its 1Q15 results which turned out to be in-line with our expectations. Gross revenue jumped 10.1% YoY to S$24.7m, driven by stable organic growth and a full-quarter of contribution from Siloam Sriwijaya which was acquired in Dec 2014. This formed 24.6% of our S$100.5m FY15 forecast. NPI grew 9.3% to S$24.2m, a slightly slower pace than topline as higher property operating expenses were incurred due to Sarang Hospital, property tax, insurance and building audit fees. DPU for the quarter came in at 2.06 S cents. This represented a YoY growth of 3.5% and constituted 24.8% of our full-year projection.
Siloam Hospitals reported strong results
Siloam International Hospitals, which is the operator of FREIT’s Indonesian hospitals and a subsidiary of FREIT’s sponsor Lippo Karawaci, recently reported a robust set of FY14 results at the end of last month. Gross operating revenue increased by 33% to IDR3,341b, while EBITDA accelerated 56% to IDR466b. This was underpinned by continued traction in demand for quality healthcare services throughout Indonesia. Operationally, Siloam International Hospitals registered a solid 34% and 24% jump in its inpatient admissions and outpatient visits, respectively.
Maintain BUY
Looking ahead, we expect FREIT to maintain its core focus on the Indonesian healthcare market, given the favourable demand and supply dynamics, rising middle-class population and healthy pipeline of potential acquisition targets from Siloam International Hospitals. FREIT will also explore asset enhancement initiatives over the next few years for the following assets: Siloam Hospitals Surabaya, Siloam Hospitals Kebon Jeruk, and Imperial Aryaduta Hotel & Country Club. Given this in-line set of results, we maintain our projections on FREIT. The stock is currently trading at 5.8% FY15F distribution yield. Maintain BUY and S$1.50 fair value estimate on FREIT.
First REIT (FREIT) posted its 1Q15 results which turned out to be in-line with our expectations. Gross revenue jumped 10.1% YoY to S$24.7m, driven by stable organic growth and a full-quarter of contribution from Siloam Sriwijaya which was acquired in Dec 2014. This formed 24.6% of our S$100.5m FY15 forecast. NPI grew 9.3% to S$24.2m, a slightly slower pace than topline as higher property operating expenses were incurred due to Sarang Hospital, property tax, insurance and building audit fees. DPU for the quarter came in at 2.06 S cents. This represented a YoY growth of 3.5% and constituted 24.8% of our full-year projection.
Siloam Hospitals reported strong results
Siloam International Hospitals, which is the operator of FREIT’s Indonesian hospitals and a subsidiary of FREIT’s sponsor Lippo Karawaci, recently reported a robust set of FY14 results at the end of last month. Gross operating revenue increased by 33% to IDR3,341b, while EBITDA accelerated 56% to IDR466b. This was underpinned by continued traction in demand for quality healthcare services throughout Indonesia. Operationally, Siloam International Hospitals registered a solid 34% and 24% jump in its inpatient admissions and outpatient visits, respectively.
Maintain BUY
Looking ahead, we expect FREIT to maintain its core focus on the Indonesian healthcare market, given the favourable demand and supply dynamics, rising middle-class population and healthy pipeline of potential acquisition targets from Siloam International Hospitals. FREIT will also explore asset enhancement initiatives over the next few years for the following assets: Siloam Hospitals Surabaya, Siloam Hospitals Kebon Jeruk, and Imperial Aryaduta Hotel & Country Club. Given this in-line set of results, we maintain our projections on FREIT. The stock is currently trading at 5.8% FY15F distribution yield. Maintain BUY and S$1.50 fair value estimate on FREIT.
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